The only conspiracy in which I might be accused of involvement is the mass collaboration by consumers known as Web 2.0, which has evolved into Web 3.0 using "linked data" that computers can read (aka "the semantic web"). Lots of information - including government data and data from online bank accounts - is now available in this format because it makes analysis so much easier. Analysing the data is necessary to convert it from being merely information into useful knowledge. This is why the government is keen that banks, telecoms providers and big energy start making all your transaction details available to you in machine-readable form - if you want it. Gaining insight into your finances, communications and energy use will enable you to make better spending decisions and even negotiate new, bespoke products - if you want to do so.
In an explanatory post on the Which? website, Consumer Affairs Minister Jo Swinson sparked a number of comments by people who do not want to be empowered or have their consumer experience made more efficient. They are happy to make their own product searches and to use price comparison services. Evidently, they are not concerned at the number of problems detected by the Office of Fair Trading in its work on the price comparison sector. They also appear to believe that information security and privacy safeguards around existing transaction databases are adequate. I am not amongst them.
It's perhaps unfortunate that this debate seems to be centring on price comparison services, when it's really the mainstream product providers who are to 'blame' for the lack of consumer bargaining power in key markets. In fairness these services have evolved into a prime marketing channel through being more nimble, internet savvy and committed to transparency than the mainstream product providers themselves. This has rendered the services useful to consumers up to a point, but they are limited by their deals with the product providers as to how far they can really empower the consumer. In this sense they occupy the battleground created by consumer rebellion and institutional resistance.
I have expressed my own frustration with the current model of price comparison service for many years. That so many engage in extensive television advertising campaigns tells you that being a price comparison service provider is a really great business to be in. But consumers are paying for those big advertising campaigns in the same way they're paying for vacuous bank advertising - through the price of the products they buy, which in turn generates commission and/or ad revenue for the comparison service providers. So, while these services are intended as a tool for consumers to use, it would be naive to assume that price comparison service providers are acting on the consumers' behalf. Product providers are paying good money to ensure these marketing channel ultimately work for them, not you. As a result, these services are not so much about 'price comparison' as simply 'comparative advertising'.
Critically, however, the current crop of price comparison sites also only rely on the entry and/or display of personal and product information in human readable form. They have you by the eyeballs, at least for as long as you're able to keep your eyes on the screen. Yet the product providers are able to rely on their computers mining and analysing a wealth of yours and other customers' transaction data to work out the most profitable product to offer you. True, in some scenarios - like insurance - this 'information asymmetry' appears to favour you, but product providers have giant data sets that can overcome any advantage you think you might have. And when in doubt they simply charge you more. In The Undercover Economist, Tim Harford shows how information asymmetry works to our detriment in buying a car - when the dealer has all the information - as well as in the market for health insurance, because we have the information and not the supplier.
So while a price comparison service might enable you to buy a cheaper traditional product from one provider versus another, you are by no means able to negotiate from a position of real knowledge about the product or price that's right for you.
This makes a human-readable interface an enormous waste of your personal time for the tedious yet important task of ensuring you spend your money wisely. Instead, our own computers should be analysing our transaction data and interrogating product providers' systems directly, not only to find a product at the right price, but to create the right product for the right price. This might be as simple as relying on your rate of energy use to always ensure you're on the right tariff, even if that means switching providers daily. Or it may open up opportunities for collaborative consumption amongst consumers with whom you share similar interests or behaviours.
Of course, most of us won't have the time, skill or resources to do all this for ourselves, anymore than we can build our own cars. So new intermediaries are springing up to store and/or crunch the data for us. I'm not going to name them because I don't want this post to be perceived as some kind of advertisement. These intermediaries have been variously called 'data stores', 'personal data vaults', 'personal information managers' and, most recently for the purposes of the Midata programme, 'midata stores' and 'midata service providers'.
The services provided by these intermediaries vary according to whether they just store, display and/or transmit the data at your request without otherwise processing it; whether they receive data from you or your current supplier; and whether they analyse the data or combine it with other data to produce a result on which you might rely to purchase an alternative product or change your behaviour in some way.
These intermediaries need contracts with consumers that permit them to access the consumer's transaction data with relevant permissions restrictions, and which agree some form of remuneration. Such contracts would need to go further than the basic service terms of price comparison sites. You might allow them to receive a disclosed commission from a product provider, but at least this would be transparent to you. This marks the line between whether the intermediary is acting for you or the product provider, and there will need to be clarity on this point.
Some people say they don't want suppliers to store any of our transaction data. They want it deleted as soon as it's no longer needed. But it should be clear by now that your transaction history could be very valuable to you, and you should have the option of downloading and storing it and giving it to another provider. Most businesses insist on such 'data portability' when moving from one outsourcing service provider to another, for example, and this can be just as important for consumers and small businesses.
Identity and authentication are also important features of a world in which transaction data is being transmitted. Perviously, I've suggested that proof of identity should be momentary, based on much wider behavioural data than just the static datasets that fraudsters can replicate, and the data used to establish your identity should be discarded straight away, rather than held for re-use. But that is not to say that transaction data itself should be deleted.
It's perhaps unfortunate that this debate seems to be centring on price comparison services, when it's really the mainstream product providers who are to 'blame' for the lack of consumer bargaining power in key markets. In fairness these services have evolved into a prime marketing channel through being more nimble, internet savvy and committed to transparency than the mainstream product providers themselves. This has rendered the services useful to consumers up to a point, but they are limited by their deals with the product providers as to how far they can really empower the consumer. In this sense they occupy the battleground created by consumer rebellion and institutional resistance.
I have expressed my own frustration with the current model of price comparison service for many years. That so many engage in extensive television advertising campaigns tells you that being a price comparison service provider is a really great business to be in. But consumers are paying for those big advertising campaigns in the same way they're paying for vacuous bank advertising - through the price of the products they buy, which in turn generates commission and/or ad revenue for the comparison service providers. So, while these services are intended as a tool for consumers to use, it would be naive to assume that price comparison service providers are acting on the consumers' behalf. Product providers are paying good money to ensure these marketing channel ultimately work for them, not you. As a result, these services are not so much about 'price comparison' as simply 'comparative advertising'.
Critically, however, the current crop of price comparison sites also only rely on the entry and/or display of personal and product information in human readable form. They have you by the eyeballs, at least for as long as you're able to keep your eyes on the screen. Yet the product providers are able to rely on their computers mining and analysing a wealth of yours and other customers' transaction data to work out the most profitable product to offer you. True, in some scenarios - like insurance - this 'information asymmetry' appears to favour you, but product providers have giant data sets that can overcome any advantage you think you might have. And when in doubt they simply charge you more. In The Undercover Economist, Tim Harford shows how information asymmetry works to our detriment in buying a car - when the dealer has all the information - as well as in the market for health insurance, because we have the information and not the supplier.
So while a price comparison service might enable you to buy a cheaper traditional product from one provider versus another, you are by no means able to negotiate from a position of real knowledge about the product or price that's right for you.
This makes a human-readable interface an enormous waste of your personal time for the tedious yet important task of ensuring you spend your money wisely. Instead, our own computers should be analysing our transaction data and interrogating product providers' systems directly, not only to find a product at the right price, but to create the right product for the right price. This might be as simple as relying on your rate of energy use to always ensure you're on the right tariff, even if that means switching providers daily. Or it may open up opportunities for collaborative consumption amongst consumers with whom you share similar interests or behaviours.
Of course, most of us won't have the time, skill or resources to do all this for ourselves, anymore than we can build our own cars. So new intermediaries are springing up to store and/or crunch the data for us. I'm not going to name them because I don't want this post to be perceived as some kind of advertisement. These intermediaries have been variously called 'data stores', 'personal data vaults', 'personal information managers' and, most recently for the purposes of the Midata programme, 'midata stores' and 'midata service providers'.
The services provided by these intermediaries vary according to whether they just store, display and/or transmit the data at your request without otherwise processing it; whether they receive data from you or your current supplier; and whether they analyse the data or combine it with other data to produce a result on which you might rely to purchase an alternative product or change your behaviour in some way.
These intermediaries need contracts with consumers that permit them to access the consumer's transaction data with relevant permissions restrictions, and which agree some form of remuneration. Such contracts would need to go further than the basic service terms of price comparison sites. You might allow them to receive a disclosed commission from a product provider, but at least this would be transparent to you. This marks the line between whether the intermediary is acting for you or the product provider, and there will need to be clarity on this point.
Some people say they don't want suppliers to store any of our transaction data. They want it deleted as soon as it's no longer needed. But it should be clear by now that your transaction history could be very valuable to you, and you should have the option of downloading and storing it and giving it to another provider. Most businesses insist on such 'data portability' when moving from one outsourcing service provider to another, for example, and this can be just as important for consumers and small businesses.
Identity and authentication are also important features of a world in which transaction data is being transmitted. Perviously, I've suggested that proof of identity should be momentary, based on much wider behavioural data than just the static datasets that fraudsters can replicate, and the data used to establish your identity should be discarded straight away, rather than held for re-use. But that is not to say that transaction data itself should be deleted.
The impact of all this on mainstream product providers cannot be underestimated. I've previously drawn the distinction between 'facilitators' who exist primarily to solve customers' problems and 'institutions' who exist primarily to solve their own problems at their customers' expense. Clearly this new environment will favour product providers who are aligned with consumers' day-to-day activities rather than those who make life awkward because it suits their own profitability. A gulf may well begin to open between product providers as they are tested by this distinction. More confident consumers should be more prepared to spend money with facilitators than those faced with institutions they distrust.
However, I believe that this trend will most likely result in a series of digital platforms on which consumers and suppliers in various markets directly negotiate products and pricing in a transparent way, based on each consumer's transaction data, wherever that is stored. Such platforms have already arrived in so many other consumer markets as part of the Web 2.0 phenomenon, that it's only a matter of time that they arrive in the markets targeted by the Midata programme in any event. And it's only natural that consumers would want to leverage their own transaction data in that context.
1 comment:
Hi. I found your blog after looking into the AI in consumer transaction data (previous articles I read were from Data Hunters here). Dynamic identity verification through behavior... from a privacy-protection standpoint, very intriguing
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