How could technology help people save money on their bills?

There is a huge hidden cost to those digitally excluded, and it is often those who would benefit most who are those unable to get these benefits. hashtag#switching hashtag#digitization hashtag#digitalinclusion

It could be one way to stop loyal customers being charged more — but it needs to work for everyone

We recently made a super-complaint to the Competition and Markets Authority (CMA) as we found that companies were charging loyal customers over £4 billion more for the same services.

We want the CMA to find solutions that tackle the loyalty penalty. One thing we’re interested in is how technology enables the loyalty penalty, and how it could help tackle it.

Technology enables the loyalty penalty

Companies have a big potential edge. They can pour their resources into buying huge datasets about us. And they can develop algorithms that accurately predict whether we’re likely to switch or stick. If they think we’ll stick, they can hike up the price to match.

The Government and the CMA recently announced a review into how companies are using this data. But at the moment, customers are losing out.

Technology could help tackle the problem

Switching suppliers is a hassle. People worry it will go wrong or think it’s too complicated. Technology already helps some people navigate these complexities. Price comparison websites are a good example as they help people access better deals.

But people have to keep switching, every year or two, or they’ll end up paying much more. And many people — particularly our clients — can’t, or don’t want to, do this. So we need tools that radically reduce the levels of effort people need to put in.

We’re starting to see progress in this area. Automatic switching tools have kicked-off in energy — this is where a third party automatically switches you to the best deal.

In banking, the Current Account Switching Service will transfer all regular payments from your old bank to your new one automatically, within 7 days. No fee, no hassle, no lost wages or unpaid bills.

Tech can also mean lower costs for everyone. Smart meters, for example, can help people keep track of how much energy they’re using and take advantage of cheaper ‘time of use’ tariffs.

All this helps make complex, confusing markets more transparent and more accountable to the people who depend on them.

Tech needs to be built responsibly

Technology is only ever as good as the people who design and regulate it.

We need to make sure tech operates in these markets in a responsible way. Otherwise, it could create more problems than it solves.

We need some baseline principles about what tech can and can’t be used for. For example should companies be allowed to use tech to make it harder for their customers to switch, not easier?

Most price comparison or switching services are designed for engaged, affluent customers. There’s currently little incentive for businesses to target more vulnerable groups — because they tend to be much harder, and more expensive, to reach. If the market is left to itself, technological advances simply won’t help many of our clients.

21% of UK adults don’t have basic digital skills. These people are unlikely to benefit from tools that assume, or need, some level of internet access, ability or confidence. And evidence from our service suggests that the same people are disproportionately likely to pay the loyalty penalty.

One reason Ofgem’s recent collective switching trial — where a third party negotiated a cheap energy deal on behalf of a large group of customers — was so successful was because people were able to join the switch over the phone. As we highlighted in our super-complaint, this is not the norm. Most of the time, people who are digitally excluded are shut out from tools that could give them vital savings.

It’s not just a question of basic access and ability, though. Research has found that 57% of the population have some awareness of what it means to live in a digitally connected world. But few of us are making genuinely informed decisions about who we share our data with, what it’s used for, and what we exchange it for.

And as technology helps more loyal customers to switch away with ease, what happens to those who don’t? Will firms compensate by raising prices for their most loyal customers?

Collaborating for customers

The relationship between technology and consumer protection is complex and nuanced.

When responding to our super-complaint, we hope the CMA will give serious thought to how technology could help fix the loyalty penalty. Making the most of technology in this environment will need collaboration between regulators, consumer services and technology specialists.

Ultimately, tech can and will help some customers. But it’s not a replacement for protections designed with the most vulnerable people in mind.

Effective, long-term solutions to the loyalty penalty will tackle the issue from every possible angle — technological solutions are only the start.