It is ironic that you can borrow money with a few clicks of the keyboard or through an app on your mobile phone, but seemingly have to jump through hoops if you want to set up a savings account. It is therefore little wonder that as a nation we have a ‘spend it now’ attitude to money and see debt as a normal way of life.
Of course there is nothing new about debt, but as a nation we have lost the culture where saving is seen as the positive thing to do. Fifty years ago we saved for what we wanted and the UK led the world in levels of pension savings. Re-establishing a culture where it is as easy to save as it is to get in debt was one of the driving forces behind Tisa’s decision to create the pan-industry Savings & Investments Policy project (Tsip) 18 months ago.
The latest policy proposals from the project have just been announced and a key question to be answered is, how do we harness technology and make it easy to save? Importantly, how do we then maintain the relationship with our customers as their life style, employment and financial circumstances change?
Part of the solution is to remove the barriers to saving that at best exasperate customers and at worst put them off from even attempting to try. The answer could be the digital passport.
If all the information is contained within a digital passport it would make this process much more efficient for both the customer and the firmOpening a new account or purchasing a financial product generally requires an individual to provide various forms of proof of identification each time they go to a new provider. With large firms that have separate business units, such as banks, the customer may have to produce the same information for each unit. For the financial institution there are real costs associated with additional manual processing and also the reputational cost associated with being perceived as a company that is difficult to do business with.
If all the information is contained within a digital passport it would make this process much more efficient for both the customer and the firm. This would need a change in the current regulations to allow for processes such as anti-money laundering and know your customer. However, there is no reason why the current levels of consumer protection cannot be maintained while at the same time minimising the potential for fraud.
But a digital passport can offer more than just a tool to validate an individual’s identity. Additional functionality will enable a customer to manage many aspects of their savings, including opening an account or purchasing a financial product more quickly and easily; transferring savings between providers; sharing information with selected third parties to assist in managing savings and maintaining up-to-date records with all providers. It is important to stress that a digital passport would be voluntary, with the consumer controlling the personal information contained as well as who has access to the data.
In an age where we now tend to work for shorter periods with different employers resulting in multiple pension holdings, the digital passport would offer an opportunity to keep track of these and assist in their management by providing a holistic view of all retirement savings. It would lend itself to pension transfers when people change jobs and also consolidations in preparation for retirement.
There are benefits for advisers who need to understand the existing savings situation of a client. Poor record keeping by the customer can have an impact on the cost of the advice process, as additional effort is needed to validate an accurate picture of their holdings. But if they are willing to share information from their digital passport, it will be readily available along with the terms and conditions of any savings schemes.
A digital passport would also mean that in the event of changing address, getting married or divorced the individual would only need to update his details once and share this with multiple providers. This would also help to reduce the amount of unclaimed assets by ensuring customers keep providers updated of any changes in their circumstances.
David Dalton-Brown is director general of Tisa
