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Game Changers?: A Review of Next Generation Intermediary Services

16 August 2017

Next Generation Intermediaries, full report [ 1.3 mb]

Next Generation Intermediaries, summary report [ 280 kb]

Widespread consumer inertia and the resulting diminished competition reflect the high switching costs that characterise ‘confusopoly’ markets, such as energy, financial services and telecoms. Next Generation Intermediary services (NGIs) are emerging as an innovative response to these problems. NGIs enable consumers who lack the time or inclination to engage in these markets to say ‘do it for me’ and have an NGI go to work on their behalf.

Game Changers? A Review of Next Generation Intermediary Services is underpinned by detailed research interviews with NGI practitioners and experts, which are outlined in the full report along with a review of key policy and regulatory developments of the last three years. The summary report contains an overview of these findings.

Key findings

NGIs are effective

  • ‘Do it for me’ is becoming a reality for consumers in energy, some financial services, telecoms and beyond, with the emergence of NGIs that do cut through the complexity of these markets and do minimise switching costs for consumers.

  • NGIs are achieving meaningful savings for consumers. Several NGIs offer a perpetual service and repeat the process at defined intervals, meaning ‘profitable disengagement’ can be sustained, rather than a one-off.

  • The emergence of NGIs is helping smaller providers and challengers gain market share in some markets. Despite instances of barriers and reluctance, large incumbents are increasingly accepting that NGIs are here to stay.

The current reach of NGIs

  • Success at scale does exist - but NGIs for the most part still operate at the peripheries of their markets, and remain little known relative to the major price comparison websites (PCWs).

  • Some NGIs are at risk of from ‘circle of lows’ - low consumer awareness equals low trust, resulting in low uptake and usage. Consumers can be unwilling to take the few steps necessary to onboard with an NGI service, even where this offers an immediate saving and an ongoing benefit.

  • Current low take-up translates as relatively low-impact in terms of transforming NGIs’ respective markets for the better.

Factors that constrain the optimisation of NGI services

  • Access to data: data is the lifeblood of NGI services. However, some NGIs are starved of direct access to these data.

  • NGIs are currently reliant on (i) affiliate marketing companies, (ii) services that specialise in collecting, curating and selling on tariff data, or (iii) developing direct relationships with providers. In regulated markets, this can represent a barrier to entry for NGIs and is therefore a key area for action (see recommendations).

  • In the mobile telecoms market, the lack of a gaining provider-led switching process acts as a barrier to NGIs offering a seamless ‘do it for me’ service (i.e. the consumer is still required to engage in the process).

Recommendations

The report makes recommendations focused on practical steps to support the development and further realise the potential of NGIs:

(1) raising consumer awareness of NGIs

(2) building consumer trust in them

(3) optimising NGI services by addressing the data challenges they face.