Invisible Brand

From buying bestsellers to booking theatre tickets, the internet now dominates our lives but do we really understand how it works? And when it comes to financial products, Lucian Camp explores whether the internet works for, or against us?

Tell me if you think I’m wrong about this, but on the whole I think that so far the internet has made amazingly little fundamental difference to the way that individuals deal with the world of financial services.

OK, some of its most powerful generic capabilities apply as much to financial services as they do to anything else. First and probably foremost, the internet enables us to research our financial decisions quickly and easily, perhaps most obviously through the use of price comparison sites. And second, when it comes to dealing with financial services providers, it offers an alternative that’s not exactly better than using the phone, writing a letter or visiting a branch, but is irritating and tiresome in a different sort of way.

It’s another story in b2b. I do think that the way that intermediaries’ relationships with financial services providers have been digitised does now amount – for most of them at least – to a transformation in the way they do business. And the move towards open investment architecture, with its huge arrays of funds and online portfolio design and management tools, wouldn’t really have been possible in a pre-internet world.

But when it comes to individuals, it’s difficult to think of any new and important developments in our financial lives that the internet has really made possible, or fundamentally transformed. Where is the financial services case history equivalent of eBay, where the availability of the internet has resulted in a completely new situation in which, I’m told, hundreds of thousands of us are now renting spaces at Selfstore to stockpile pallets of Polish jam, or classic sixties pinball tables, or dodgy autographed portraits of Michael Owen and Frank Lampard, until we can find enough people willing to meet our reserve price?

For that matter, where is the equivalent of the budget airline case history, in which the website is the cornerstone of a new way of thinking about travel – especially at weekends when hundreds of thousands of people are now routinely heading off on a Friday evening to Tallinn, Tampere, Toulouse or anywhere else they can get to in less than two hours and for less than £60 return?

And come to that, where is the Facebook, MySpace or YouTube? Where is the Second Life?

I think there’s a reason why the internet has proved a lot less transformational in the financial world than it has in many other areas of life: in short, the people making the decisions, signing off the business plans and writing the cheques for financial services internet projects don’t actually like the idea of transformation very much.

They like the idea of cost reduction – using the internet to find incrementally cheaper ways of doing things. Straight-through processing, for example, floats their collective boats big style. But when it comes to transformation, what the internet does best is to give more power to people and less power to corporations, and – perhaps unsurprisingly – financial services decision-makers don’t like the idea of that very much at all.

The fact is, even the most benign and consumer-friendly captains of the financial services industry still see themselves dealing with people in archetypal parent-child relationships. In their minds, people are like silly sheep at worst, like young children at best – feeble, inadequate, ill-informed, ill-educated, in desperate need of a kindly parent to provide clear, sensible guidance and so not make a horrendous mistake.

You’ll see this attitude reflected, for example, in the somewhat hazy musings of the Thoresen Review on how its Money Guidance service might be designed and delivered; or in the scribings of the FSA on the broader subject of its intriguingly-titled “financial capability” strategy.

But the internet isn’t particularly good at facilitating this kind of vertical, top-down, parent/child didacticism.OK, you can offer people some fun interactive learning tools, but in my experience these are fun in much the same way that the removal of toenails without anaesthetic is fun.

What the internet is brilliant at is horizontal communication and interaction between people, with only a minimal level of editorial control, if any, on the part of the providing company.

Many, if not most, of the major b2c internet success stories are wholly or partly to do with this kind of horizontal interaction – Facebook, MySpace and the whole social networking thing, obviously, but also eBay and even, in a sense, all those entirely commercial sites like Amazon which make horizontal communication an integral part of their sales process, with reader reviews, a star-rating system, best-seller lists and individuals’ Top Ten recommendations. When asked why they don’t like the look of this sort of thing, financial services providers have replied a) that most consumers don’t understand financial services well enough to talk to each other sensibly about them; and b) that even if they did have enough understanding, they’d egg each other on to do foolish and inappropriate things.

The first point is kind of true, but only for the entirely unsatisfactory reason that financial companies want it that way. Knowledge is power, and by deliberately building a world that is incomprehensible to ordinary people they maintain their power in much the same way as African witch doctors. In the internet age, rebuilding a proposition so that ordinary people can easily find their way around it is just as possible in financial services as it is in low-cost air travel: it’s just that the airlines wanted to, while the FS community (not just providers, but regulators, commentators and distributors too) didn’t.

And what about the second point? Well, excuse me while I try to decide whether to laugh, cry or punch someone. I really don’t think that an industry which, through its greed, folly and miserably short-sighted decision-making, has brought our civilisation to the brink of catastrophe is in any position to lecture anyone about the risk of egging each other on to do foolish and inappropriate things.