Despite all the talk of artificial intelligence, robo-advice and real-time dashboards, the real-world on-line experience for most pension scheme members (if they have an on-line experience at all) is rudimentary at best. This is not for a lack of innovative ideas – there are some astonishingly clever services being demonstrated and already in use in other industries. So why haven’t pension services already been transformed by new technology?
Transformations in consumer technology services are not always driven simply by the invention of a new consumer application. More commonly the real catalyst for change are reforms of the underlying infrastructure.
Smart phones didn’t appear just because Apple had a bright idea. It was the groundwork laid down by advances in semiconductor miniaturisation and mobile data transmission standards that was the real driver. Video streaming didn’t catch on just because Netflix and Amazon decided to launch new services. It was only when the Internet data bandwidth to the average household reached a few MBs that the innovators could innovate. The emergence of electric cars took more than a BMW engineer installing an electric motor. Much more important were advances in battery technology and I suspect we won’t see electric cars really catch on until we have wholesale reform of the humdrum (but hugely challenging) world of electric power distribution.
And so it is with pensions. I’ve no doubt that the fintech entrepreneurs could develop some very appealing services that could really help members engage with their pensions but they are hamstrung by the existing pension infrastructure. The key technology initiatives right now are concerned with reforming that infrastructure with developments in data standards, digital ids, trust frameworks and system modernisation.
Some good progress has already been made. Investment processes have already been streamlined with open data standards (aka ViaNova) and new standards for transfers have been developed along similar lines. TISA are working with the government Verify service to create a common digital identity verification service for financial services and following close behind is work on trust frameworks that would enable members to safely allow their data to be shared by service providers.
Pension systems are notoriously outdated and resistant to any connection with external services. But this is also beginning to change and the pension dashboard initiative, assuming the government mandates participation, would compel administrators to open up their systems to external service requests.
In combination these reforms will allow a new landscape of pension technology to emerge, where pension engagement is supported by a network of services and service providers rather than just the pension administrator. With these foundations in place the more visible innovation can begin from the pension equivalents of Amazon and Netflix. And I’m sure that will result in member services that I couldn’t even imagine right now.