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Where Next for Intermediaries?
It was three years ago that Ctrl Shift coined the phrase ‘Next Generation Intermediary’ in a report commissioned by Consumer Futures, itself now consumed by Citizens Advice. The report was a showcase for the (then) decade-old price comparison industry and how it was poised to transform itself into one where consumers effectively outsourced tiresome tasks like switching energy supplier. An ‘NGI’ - with the necessary consent - would use personal data to identify an offer that best suited a consumer and then oversee the switch. This would empower any consumer who lacks the time or inclination to trawl around for a better deal and therefore provide a solution to the low levels of switching. OK, it was meant to be glimpse into the future but if you read that report today - and look around at the various price comparison offerings currently available - you’d wonder where those three years have gone.
However, the NGI dial may be finally starting to turn. Last May, Citizens Advice & The Behavioural Insights – or ‘Nudge’ Unit said: “APIs should be used to allow consumers to access their data & make it easier for consumers to find their MiData files. Consumers should be able to delegate their switching to a third party provider.” MiData allows consumers to view and download their consumption data as a file from their supplier’s website – as long as that supplier has volunteered to join the scheme and the customer has an online account. GoCompare reckon that customers who use MiData for banking, an early-adopting industry, are five times more likely to switch than those who use standard ‘best buy’ tables. More recently the energy regulator, Ofgem, published a Future Insights paper that predicts: “The potential emergence of services where consumers can hand over control of their energy purchases to a third party”.
And, in mid-December, the Competition & Markets Authority opened a new consultation into MiData Phase 2. This, when eventually implemented, could allow consumers to give an intermediary access to their Midata file in a 30-minute window, without having to download it themselves. The intermediary would then use this data to provide a comparison between cheap tariffs available and… hey presto!
Great! Well, at least for the householders it will apply to… but where does that leave non-domestic customers? Ie The UK’s two million small businesses (SMEs) and charities buying commercial energy for their premises and for which access to the equivalent account data is still an ongoing and unaddressed issue?
At present our research tells us that SMEs are less likely to tackle business energy costs than many other overheads such as insurance, telecoms, rent or even their own household utilities. The CMA’s report concedes that 45% of them are stranded on expensive default tariffs. One of the main reasons for this is that the information about their contract and consumption is not readily accessible. Among those that do switch regularly, having someone they trust look into it for them is the number one driver for engagement in the market.
Sure, customers could always contact their supplier requesting the key information but most don’t get that far. They might even find the information on a bill but half of the businesses we speak to don’t have one to hand. A better alternative is for customers to delegate their authority to an intermediary - such as Make It Cheaper - to access, analyse and exploit this data on their behalf via a digital letter of authority (LoA). Digital LoAa are neither as elegant a solution as MiData, nor quicker, but they do present a way to help businesses in an ‘NGI-style’ without having to wait an entire generation for the technology - or the suppliers - to catch up. And businesses are keen on using LoAs too. In a recent online survey an overwhelming 92% of our customer panel said they would expect their supplier to provide information to a third party who they have appointed to find out on their behalf. But it’s not just our own customers - who are already engaged in switching - saying this. We have also collected evidence from disengaged SMEs as well, positively testing the hypothesis in focus groups that mandating energy suppliers to respond to LoAs in a timely and accurate manner would make more of them go ahead and switch.
However here’s the thing – like MiData – energy suppliers are not actually obliged to respond to an LoA and, even when they do, this can be slow and inconsistent – with responses we receive currently sitting at 60% (rising to 80% only when we use each different suppliers’ individual LoA templates). And - within supplier organisations’ internal departments - there are different ways of dealing with LoAs which means they will communicate with intermediaries for some details of the switching process but not others. These flaws can make it very frustrating for all concerned and it is not surprising that many businesses abandon the switching process with a bitter taste in their mouth.
So with energy already lagging behind on MiData, let’s close the generation gap – particularly for businesses – by mandating digital Letters of Authority with suppliers to be held to account for a quick and consistent response.