The great divide

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  • Financial services must be allowed to evolve bottom-up

    An excellent overview that is hugely concerning. There is already very little focus on providing more usable, transparent and cost-effective financial services from the consumer's standpoint, because that would seriously impact revenues and profitability that are already sliding.

    Retail banks are not only blind to what consumers want, but wilfully so. Witness how the UK banks in particular have actually gone to court against their customers to defend fees that consumers and regulators have long complained are too high and their extreme resistance to speeding up electronic payments, even in the face of competition inquiries.

    The good news, is that over the past decade, consumers have seized upon usable Internet technology to disrupt traditional supplier-determined experiences in travel, music, retailing, betting/bookmaking, games, telephony, TV and so on. This rapidly evolving trend will reshape banking, insurance, asset management and pensions, provided regulation does not get in the way.

    Already P2P in micro-finance and social lending services are creating transparent 1-1 agreements that enable people to see where their money goes and who it comes from. Secondary markets for those contracts will develop, thereby influencing the instruments traded there amongst people who already engage in retail stock-trading, spread-betting, CFDs and so on.

    For a further catalyst, look no further than the current credit crisis. The impact of the inability of banks to understand who owes what to whom and confidently lend to each other is illustrative of how badly transparency is lacking; and the savers' run on Northern Rock shows that consumer feel it too, and are prepared to act.

    It is now critical that the FSA views financial services not from the perspective of whom and what it regulates, but in terms of how consumers want to use money, and what is needed to help them do it.

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