Striking a fine balance between innovation and stability in banking technology – Pike

Striking a fine balance between innovation and stability in banking technology – Pike

This was when the Prudential Regulation Authority (PRA) set up its New Bank Unit, designed to assist those looking for a banking licence to navigate the application process in a more streamlined and cost-effective way. Prior to this, Metro Bank was the first bank to receive a licence in more than one hundred years when it was authorised in 2010. 

The government’s driver for creating challenger banks was the apparent monopoly the big four banks had; a monopoly blamed partly as a cause of the credit crisis in 2008. The government also wanted more consumer choice and diversification, encouraging the upsurge in specialist banks.

No doubt this has been achieved, but perhaps not to the scale originally envisaged. For example, current accounts are not yet a mainstream product of most challengers, whereas mortgages and savings are the norm in nearly all instances. 

Most new entrants have been successful, particularly with technological innovation. Take Atom Bank as an example, the first mobile-only bank in the UK, demonstrating what could be achieved using technology. But as we all know, as soon as something new is launched there will always be someone trying to better it. There have been further examples of fantastic use of new, innovative technology by challenger banks seeking to achieve improved customer acquisition and customer interaction.   

However, data from compliance experts FSCom in June reported that just four banking licences had been granted in the previous year, compared with 14 the year before, despite the number of applications having remained largely the same. Could this be a symptom, not only of concerns over risk management, but also some technologies, suggested as part of the licence applications, not being robust enough? 

Those that have successfully launched since 2014 may need to re-evaluate their requirements for core accounting and servicing platforms as their technology ecosystem evolves. We are definitely seeing more requirements to implement platforms such as Phoebus within some very innovative technology stacks.

What this means is that an institution can have a proven, established and robust back office solution as its core engine. Then by using application programming interfaces (APIs), integrate with a multitude of innovative solutions to gain a unique selling point over its competitors. APIs have been the main focus of Phoebus’s research and development spending over the past few years.

Increasingly, customers are as interested in technology as they are rates. As the open banking movement gathers momentum and general consumer expectations continue to increase, this desire to continually evolve the ecosystem with new technologies and applications will only intensify. There is obviously a balance to be struck between innovation, which we all encourage, and proven technology that the regulator, amongst other bodies, deems appropriate for the banking sector. Time will tell who will be successful or not and how that success is actually measured. 

One thing for sure is that the challenger banking movement has been a driver for more customer choice as well as raising the bar. It has refreshed the traditional banks’ attitudes towards modern day customer expectations for day-to-day interaction. However, moving forward, more of a balance may need to be struck between completely re-inventing the technology wheel and using the more well-established platforms, with aspects of customers’ experiences facilitated by innovation.               

How important are mortgage incentives on a product?

How important are mortgage incentives on a product?

I have never really been keen on incentives. They often act to just cloud the judgment of clients (and sometimes brokers) around comparing what the real cost differentials are.

I especially do not see any reason to offer prizes, draws and the like to brokers either, though this has largely been consigned to the history books in any case.

Back somewhere through the mists of time, I remember various offers including the chance to win a car (a Rover I think), mortgages paid for a year and a whole host of other things.


The real problem is with the term incentive; it puts in mind something tempting that makes someone take a deal that otherwise they wouldn’t do because it is generally poor value.

For example, I have never understood why incentives are allowed at all where new-build properties are concerned. They cause distortions and other issues – just sell the property for the value it is actually worth.

Ignoring some of the more obvious gift type ideas like shopping points, a specific product feature such as cashback, stamp duty or fees assistance feels like something very different and is preferable. These are some of the things that can be very valuable, especially to first-time buyers.

I am also old enough to remember the famous Bank of Scotland products that allowed you to roll in Stamp Duty and legal fees as well as get a cheque book to draw down an additional sum as and when required. While we may laugh now, they made a difference to many sensible buyers.

Helping borrowers

The best incentives, are therefore those that actually help the borrower and as it is hard enough to save for any kind of a deposit these days, help with real costs such as Stamp Duty, valuation and legal fees can be the turning point between purchasing a property and not.

In fact, these are the only type of benefits that matter, things that make a real difference to borrowers and allow them to buy their dream home when they may otherwise have struggled.

Everything else is just baubles and I would much rather see lower rates and lower fees than a procession of pretty incentives that do nothing to really help, but confuse what is already a difficult decision.

Don’t be caught out on the wrong side of Twitter – Blacks Connect

Don’t be caught out on the wrong side of Twitter – Blacks Connect

Simply communicate badly or insensitively with a client (or prospective client), and you may find evidence of your mis-judged remarks shared with all and sundry.

Needless to say, this can be particularly damaging especially given we are supposed to be a ‘people business’ and if you’re shown to be communicating poorly with people then why should others seek your services?

I was reminded of this recently when I saw a tweet from a clearly disgruntled ‘client’ bemoaning the ‘advice’ their ‘adviser’ had given them. I write ‘advice’ and ‘adviser’ because the correspondence between the two showed the adviser concerned effectively wanted nothing to do with the individual who had sought their services.

Now, ultimately, we can work on behalf of whoever we might wish to, but I might suggest there is a tactful way of saying this. It’s the difference between, “I’m afraid I won’t be able to help you on this occasion” and “do not darken my door ever again”. Unfortunately the adviser had chosen a variation of the latter.

Tweet with caution

Imagine how any mortgage-seeking individual might feel to receive such a correspondence, especially if they were in need of advice given their financial situation?

Frustrated at such a response, they might issue a tweet and, even though later it might have been regretted, the damage would already have been done. Should this have gone ‘viral’ I suspect the adviser concerned would also have been regretting their poor choice of words.

So, the point is, in today’s environment we have to be extraordinarily cautious about how and what we communicate. An ill-thought out tweet can be deleted later but the damage may already be done. Ever heard of screen shots? They can keep your disastrous musings alive for ever.

Even what we might view as private communications can reach the public domain and, if they are misjudged or even misconstrued, they have the capacity to inflict real damage to individuals and businesses. Don’t be caught on the wrong side of this argument, it’s one you’re likely to lose.

Emma-Maria Coffey is Business Development Manager at Blacks Connect

PPI ruling could pave the way for wave of fresh claims – Berkeley Alexander

PPI ruling could pave the way for wave of fresh claims – Berkeley Alexander

The Supreme Court found that a failure to disclose a large commission payment on a single premium PPI policy made the relationship between a lender and the borrower unfair under section 140A of the Consumer Credit Act 1974. However, the consequences of the decision don’t just apply to PPI.

This decision, along with the Financial Ombudsman’s (FOS) duty to take into account case law when considering complaints, could open the door to a new wave of fresh claims for compensation and have other ramifications.

Here we lay out some of the possible implications for the industry.

Contrary to some recent reports, it is unlikely to affect cases already settled where the client has received a full refund of all premiums, as that would have included a refund of the commission.

It could open up a huge work load as the claims management companies could re-visit the cases where the claim has been repudiated, with them asking for disclosure of commission and then looking for the adviser to justify the level of commission taken or make a refund to the client.

Justified earnings?

It emphasises that commission on all products should be commensurate with the work involved and the premium paid by the client and should be fair. Brokers should ask themselves “if my client asks me what I earn, can I justify that based on the work I do?”

This commission principle applies to all general insurance products. Should advisers justify taking 30+% commission on a household policy just because the client is prepared to pay the increased premium to allow for this? It also opens up a potentially dangerous situation if the adviser uses a provider’s system that offers flex commission where you can increase it above the market norm. It is, however, only likely to impact firms who have taken an unfairly high percentage of the premium as commission and therefore won’t affect the majority of advisers.

Perhaps the FOS or Financial Conduct Authority (FCA) should publish some guidelines or be more prescriptive on what they consider reasonable commission, but then should the regulatory bodies dictate what commission levels should be paid? I would argue not, as the adviser and providers should be allowed to set their own levels, based on their costs/workload, and so forth. But the how would the FCA and FOS judge what was “excessive”?

Geoff Hall is MD at Berkeley Alexander

Understanding consumers’ views on equity release – Retirement Advantage

Understanding consumers’ views on equity release – Retirement Advantage

To answer that, we partnered with market research firm Bdifferent and held a series of focus groups with people approaching, at, and in retirement.

We found that views of equity release, and what part it can play in retirement, differ dramatically depending on individual circumstances. At one end of the spectrum we found the logical equity release borrower. Financially aware and informed, logical borrowers tend to own more valuable property and consider the pros and cons of equity release as part of a strategic look at their finances.

At the other end of the spectrum there are those borrowers searching for good value. Put off by the prospect of leaving an unpaid loan after they’ve died, and unconvinced by the benefits of equity release, value hunters simply see other options as better value for money.

All-in-all we uncovered five different typologies. That in itself provides real food for thought for advisers in discussion with customers about how equity release can provide income in retirement.

Firstly: there are often misconceptions to be put right. This is a rapidly evolving industry and we shouldn’t assume over-55s are au fait with the very latest products and services available.

Secondly: the fact there is no ‘one size fits all’ solution reinforces the need for equity release to be introduced as part of that holistic approach to retirement planning.

Thirdly: There are many barriers to using equity release cited. The earlier consumers are introduced to equity release, the earlier they can become comfortable with it and barriers can be overcome.

Many of the participants highlighted financial obligations that worry them, like looking after parents living into their eighties or nineties. Therefore, equipping people with an understanding of what their overall wealth – including property – can do for them in retirement is critical. More and more people are embracing equity release as part of their solution, and all the signs point to this continuing in the years ahead.

Alice Watson is product and communications manager at Retirement Advantage, Equity Release formerly Stonehaven

What defines an equity release dabbler? Rozario

What defines an equity release dabbler? Rozario

Earlier this week, comments from Will Hale of Key Partnerships on the regulatory pitfalls which face advisers who ‘dabble’ in the sector but do not specialise sparked a strong reaction from Age Partnership technical manager Simon Chalk. Chalk described the comments as ‘scaremongering tactics’.

This is certainly an interesting debate and one which I would like to look at from a different angle.

At the risk of being labelled a pedant, this debate does beg another question: what defines a dabbler?

The FSA coined the phrase ‘dabbler’ some time ago and unfortunately this term has stuck. The dictionary definition of dabble is, “to undertake something superficially or without serious intent”, and hereby lies the crux of the argument.

Just because an adviser is not writing a certain amount of equity release business does not mean they are only dabbling. What’s more, I am unaware of the exact measurement of a dabbler, how much dabbling does a dabbler have to do? All equity release advisers have to start somewhere.

Surely it would be far more dangerous for an adviser to go from a standing start to advising on a number of cases overnight. Equity release advisers have to build up experience, knowledge and the skills required to look after this specialist sector of customers, and this cannot come overnight.

The decision to refer a case is always going to be a feasible option, and for many advisers who recognise that a customer would benefit from equity release but do not have the qualifications to advise themselves, passing their business to a trusted source is not only invaluable, but essential to their clients best outcome.

However, to define a dabbler by the amount of business they write can be misleading. There is absolutely no reason why a qualified adviser who has the necessary skills and systems in place to deal with the process, understanding of the due diligence required cannot deal with a low number of cases and still give excellent advice and service.

True, this may not be the most cost effective way for an adviser to operate, but if their intentions are to build upon this business, then this can be a perfectly reasonable start point.

As an industry, we must now encourage and support new advisers, help them understand the benefits of operating within the equity release market and welcome them with open arms.

Andrea Rozario is chief corporate officer at Bower Retirement Services

Dispelling the rumour mill on residential survey delays – Countrywide

Dispelling the rumour mill on residential survey delays – Countrywide

It’s the old adage of never letting the facts get in the way of a good rumour.It looks increasingly unlikely that the overall gross mortgage market is going to close 2015 at £220-£225bn. It may limp there in the last few months of the year – there is evidence in the CML’s data for February that overall lending may increase by 10% at the most in 2015, compared to 2014, which would be a total of £225bn.

But, just because some brokerages have seen lending increase 10% to 15% so far this year, that doesn’t mean that the whole of the mortgage market is. Look at the latest CML forecast, they are talking about ‘subdued’ lending, so what exactly are these surveyors supposed to be valuing?

With the exception of part of Q2 2014, surveyor availability was excellent in 2014 and lending reached £205bn without too many issues.

The largest surveying firms, including Countrywide, have invested further in their surveying capability after the issue with capacity in 2013 when activity in the housing market started to pick up. These firms are able to cope with more than 2014 volumes and this adds to the confidence that there will be fewer problems.

The London residential housing market is manageable at present. This is, historically, the location at which any shortages have shown themselves. Sufficient capacity remains in place for the remainder of the UK.

Finally, I would add that all of the large surveying firms are planning for a £230bn to £240bn gross mortgage market in 2016/17.

As someone who has worked for a lender, given the capacity experiences of a few years ago, I would be insuring against any risk by making sure that the surveying firms I work with had sufficient capacity to cope with my work even in the busiest of times.

Nigel Stockton is financial services director at Countrywide