Will Consumer Transaction Data Drive New Online Marketplaces?

I should begin this post by explaining that I'm involved in the Interoperability aspects of the midata programme. I was invited to participate on a voluntary basis and have no client in that process. I donate my time. I'm independent of the dozens of other participants. I didn't shoot JFK. And I don't even own a pet, let alone one I believe to be a reincarnation of Elvis Presley. 

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.

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.

It's OK: Banks Are Happy With Their Business Lending Standards

Readers may recall that UK banks are self-regulated when it comes to lending standards.

As a result, we were recently treated to the farce of a self-congratulatory report by the banks' own so-called Lending Standards Board entitled:

"THEMED REVIEW OF COMPLIANCE WITH THE LENDING CODE PROVISIONS FOR LENDING TO MICRO-ENTERPRISES". 

Naturally, this grand tome of fully 6 pages neatly concludes that: 

"...no breaches of the [Lending] Code or management weaknesses were identified and no action plans were requested, indicating that standards of compliance and practice with the requirements of the Code are very good as they relate to micro-enterprise customers."

Not that we would be told about any breaches, anyway, since the Board explains that "As most Code breaches are of a minor nature, public disclosure of all Code breaches with the associated reputational damage would, we believe be a disproportionate response." A puzzling explanation, since you would not think that minor breaches would inflict much reputational damage...

At any rate, the report is so loose and shot through with so many holes that it's a wonder it could all be gathered into a single pdf.

The review only focused on five of the many 'subscribers' to the Lending Code, and only looked at their approach to credit assessment, credit card guidelines and the treatment of customers in financial difficulties. However, only two of the firms reviewed even offer business credit cards.

The Board also "acknowledges that the majority of concerns raised by the SME lobby [you can hear the sniggers] relate to commercial issues, such as [complete lack of finance] cost of credit and security". But the report ignores such concerns, claiming only that customers are warned of the costs up front. Business loans and overdrafts appear not to have been covered beyond credit assessment stage, nor the critical issue of how well firms are handling complaints.

Interestingly, all the subscribers require a current account to be held where loan facilities were sought, but the report rather carefully states that there was "no evidence in the file sampling to indicate that subscribers require the purchase of insurance products as a condition of sanction." Perhaps another PPI-style scandal lurks here?

Of course, the overall point is that it's much easier to comply with lending standards when you're barely making any new loans. Staff need something to do. Indeed, the report trumpets the "close, ongoing management of micro-enterprise accounts" by relationship managers - no doubt anxious to demonstrate the need for their continued employment.

If a further nail were needed in the coffin of cosy bank self-regulation, this report provides it.

Waste: The UK Government Shopping Channel

Whatever you think about taxes, we have to put an end to wasteful public spending. This is not about making 'cuts'. There are no hard choices here, no job losses. This is about staff being intelligent in how they spend money. 

Believe it or not, the government is trying to reduce waste. Today's example is the 'mystery shopping' channel that enables suppliers to report poor public sector purchasing practices, as explained in the short video embedded below. But I've been disappointed not to see more signs that the public telecoms bill has fallen by 30-40%, as Green reckoned it could (progress on IT strategy is reported to be slow, and limited to central government). And I'm yet to see the total figure for travel expenditure (let alone any reduction), despite an announcement in 2011 on central procurement of travel.

But, hey, let's applaud progress where we can.

After 18 months of mystery shopping over 300 complaints have been received. Of all complaints made about 80% are said to relate to the buying process itself, followed by contract mis-management (7%), bureaucracy (5%) and technology/systems (5%). A more detailed breakdown of the 240 'process' complaints suggests significant problems with pre-qualifying suppliers and poor 'purchasing strategy'. Central government is responsible for a third of complaints, but most relate to the NHS and other 'wider public sector' bodies. About 80% of cases referred resulted in a "positive outcome" - a great achievement from zero. The recommendations (summarised below) provide further insights.

However, it would be helpful to know how this complaints process fits into a more comprehensive approach to improving the public sector procurement process. I suspect that 300 complaints in 18 months represents too small a sample of all procurement opportunities to be relied upon as a guide to root causes of major problems. And the fact that 20% of complaints were not resolved satisfactorily leaves a lot of room for improvement. While it's critical to seek and listen to 'customers' comments and complaints, I would prefer to see a more data-driven approach overall, with simple metrics aimed at detecting problems in each step of the end-to-end procurement process. One can then look at which steps are attracting the most complaints, from whom and the value at stake before dedicating resource to figuring out root causes and improvements. There are also plenty of internal suppliers and customers to the procurement process whose complaints will be important to capture in addition to those of SME bidders. Maybe that more comprehensive approach is inherent in the suggested lean sourcing process, but I haven't seen specific mention of it yet. 

It will be critical to understand the bigger picture and to see how this programme develops over the next few years.

Recommendations:

• Public sector buyers have been told not to use "pre-qualification questionnaires" for contracts with a value below the relevant EU procurement threshold.

• A supplier's history of dealing with the private sector must also be given the same weight as any record of selling to the public sector.

• Insurance only needs to be in place once the supplier has actually won a tender, rather than when responding to a tender.

• Buyers are encouraged to engage with suppliers before a tender to ensure the tender document makes sense from the start of the bidding process, to avoid endless changes along the way or even cancellation because the wrong product is being requested. That also enables SMEs to group together to win a tender against big suppliers.

• Dynamic marketplaces and the Contracts Finder portal are designed to avoid all SMEs having to sub-contract to a large supplier (and the inevitable fat mark-up). But more time needs to be provided to answer some advertisements.

• Specifications should also be drawn broadly enough to enable more suppliers to compete for the work.

• Faster payment of invoices is critical. The public sector buyer is responsible for ensuring that prime contractors pay sub-contractors within 30 days of the receipt of a valid invoice in goods and services contracts.

• Public sector buyers must not charge suppliers for the right to bid. Instead, the cost of promoting "framework agreements and other catalogue type arrangements should be related to the value of business a supplier derives from those arrangements, rather than an upfront charge."

Image from Malvern Hills District Council.

Does Brown's Story Improve With Age?

Plenty of things improve with hindsight, but could the image of Gordon Brown's time in government really be one of them? 

In "Saving the World"?, William Keegan does an admirably succinct job of restoring some balance to the disastrous picture that emerged after 13 years of New Labour. 

In particular, he relies on his deep knowledge of recent global economic history to emphasise the glorified status Gordo attained through ten years as Chancellor, eight years as chairman of the IMF’s political committee, and his almost sycophantic association with Alan Greenspan. It appears to have been this status that enabled Brown to affect disdain in meetings EU finance ministers, to successfully resist his party's urge for Britain to join the Euro, and which culminated in his ability to convene urgent meetings with G20 leaders during 2008.

William also manfully contends that Brown is entitled to both kudos as an outstanding member of the economic elite and shelter in the safe harbour of the “general consensus” – fostered by his idol, Alan Greenspan – “that the sophistication of modern financial markets had reduced the dangers of a crisis.” 

This I don't buy. For all his ‘listening’ and ‘taking soundings’ amongst his fellow members of the economic establishment, Brown was simply afflicted with groupthink (which we've since learned was rife at the IMF). That he appeared to wake up earlier than others was merely because Northern Wreck was the first retail domino to fall and he had to respond. It was just luck. And it was also luck that taking shares in banks was an option open to him, but not to a right wing US administration (as explained in Too Big To Fail).

Another criticism would be that William only seems to trace the financial crisis to the failure of the Bear Stearns funds in 2007. But that was merely when the financial establishment first realised or conceded there was a problem (as also explained in Too Big To Fail). Anyone who's read The Big Short or Fool's Gold will know that many significant players had been saying (and betting heavily) for years that a crisis was brewing amongst the very banks with whom Gordon was enraptured during his long years at the Treasury and in the IMF. Indeed, William hints at this when he explains how the economist Raghuram Rajan was "subjected to brutal criticism by leading colleagues and disciples of Greenspan's" when he warned "the great and the good" of the impending doom at a conference which Brown attended in 2005. 

In that far deeper context, Gordon's surprise (and outrage) at the sorry state of UK bank finances in 2007-08 merely cements his place amongst the elite groupthinkers who had dismissed explicit warnings for many years. Far from being an especially progressive thinker on the subject of banking calamity, he was actually caught flat-footed by the fundamental flaws others had pointed to in his very own financial system. 

In those circumstances it was the least Gordon could do to keep the ATMs working. On that particular front, he was (perhaps) making the best of a bad job. He should not be seen as having engaged in some kind of heroic quest worthy of an exalted place in the history books.

While William patiently contends that Gordon didn't cause the financial crisis itself, he also properly concedes that he did much to ensure it would be a very long journey out of it. He explains Brown’s avowed and deliberate ‘stealth’ approach to taxation and social welfare spending; the refusal to build any social housing; the unbridled expansion of public sector (complete with higher pay and pensions than the private sector); and the creation of many huge off-balance sheet PFI projects under the guise of ‘prudence’. These things, coupled with a feeble understanding of what the banks were up to, are what should combine to prevent Brown's tenure being seen in a positive light.

Amidst all this, Brown's brief tenure as Prime Minister is almost a footnote - which is strange given his elevation to that role coincided with the peak of his economic profile. William does a good job of highlighting the irony that Gordon really wasn't suited to the job that he'd schemed for so long to obtain. He also points out the irony that Gordon's tendency to dither, vacillate and procrastinate, which had worked to keep Britain out of the Euro, failed when it came to seizing the political initiative with an early general election. 

All in all, an important guide to the Brown years.

Buzzword Bingo!

PR supremo Julia Streets has finally 'opened her kimono' to reveal 'key learnings' from her years as both fan and critic of corporate 'buzzwords'.

Her serious message - very humorously delivered - is that we should avoid creating confusion in the workplace by writing and speaking as simply as possible, especially with people from other countries, communities or industries. For instance, I love her story of the chap who was concerned at the request for staff to 'push the envelope' because he thought they were being asked to offer bribes. And I recall that a London-based colleague I called from New York couldn't understand why I was mildly annoyed at having been 'blown off' for lunch. 

I agree with Julia - as a general rule. We should certainly commuicate clearly. That includes explaining the meaning of words or expressions our target audience might otherwise have to look up. One also has to be careful not to torture metaphors, as Julia points out, or to mix them into a metaphorical stew. And I share her distaste for acronyms. I nearly drowned in them while working at Reuters, until someone told me to look them up in "RAD" on the company intranet. Yes, the "Reuters Acronym Dictionary" had its very own acronym.

But (being a lawyer) I feel obliged to at least make a plea in mitigation for the humble buzzword, if not to defend it altogether.
 

There is a certain richness - and at least mild entertainment - in speaking graphically about an otherwise tedious topic, like law or finance. At a recent conference about regulation, for example, I'll admit to referring to perverse tax incentives as the "elephant in the room", which we were all obliged to politely ignore. I even pointed to the imaginary beast in the corner. It seemed a suitably mild, yet evocative image for a group that included senior policy-makers, and I think people got it... The point of such metaphors is to conjure a reasonably entertaining yet informative picture in the minds of the audience. Preferrably an image that speaks a thousand words which you won't have to.

So I think Julia attacks the metaphorical-buzzword-as-boredom-relief a little unfairly. Although, rather tellingly, she concludes with a helpful guide on how to play 'buzzword bingo', complete with word-grid. 

Overall, this is a very useful book that should be used as the basis of an online resource to which we can all contribute - rather like Roger's Profanosaurus (which even has an app). Follow-up dictionaries in this space could include a guide to words that have been misused to the point they are meaningless (apparently there are 15 you shouldn't use on LinkedIn), and a 'devil's dictionary' of words that contain toxic levels of irony. 

No doubt they too would make a great Xmas present.