Inner Workings

TECHNOLOGY IS NOT THE PROBLEM, IT’S THE SOLUTION

by Tom Murray Head of Product Strategy LifePlus Solution, Majesco

There has been a lot in the news recently about the difficulties involved in prosecuting pension scammers operating on the Internet. A large number of people have fallen victim to these scammers who advertise tempting offers on digital platforms, and the government seems powerless to stop it. Estimates put the amount of loss as high as £10 billion since 2015. Even the governor of the Bank of England has joined the chorus, stating that more people are at risk from financial fraud online than through the more regulated off-line media such as newspapers and television.

It has led to calls to increase the level of regulation on tech platforms, making them responsible for the scammers advertisements that they host. Tech platforms are everyone’s bête noire at the moment. It is hard to defend them when, as the House of Commons Work & Pensions Committee was quick to point out, they are earning money from hosting scam advertisements and then making even more from publishing government warnings against them.

This anti-tech approach is very dangerous. Taking the easy way out by finding a bogeyman to blame is not really looking at the problem correctly. The government has stated that technology platforms have been failing pension savers. However, whether platforms have a duty towards pension savers in particular is a debatable point. They certainly don’t have as much responsibility as the government do, given its push to increase pension saving throughout the UK.

Over recent years, it has been the government that has constantly trumpeted their view that individuals are best to decide for themselves what to do with their lifetime pension savings and therefore championed the pension freedoms approach. They washed their hands of telling people what to do with their savings but failed to really think through the dangers involved.

Now that the level of pension scams has increased significantly, the government seems to want to blame the tech industry. A better approach would be to understand the problem at a more fundamental level and enlist technology firms to help solve it.

In the first place, we have to recognise that the level of financial education is low across much of the population. Given the highly successful approach to increasing the number of pension savers through the auto-enrolment scheme, this means we now have a much larger pool of people with savings, making

an attractive target for scammers. Raising the interest of people in knowing more about financial services is a challenge, as they don’t need to make decisions about their pensions very often. Yet if the government stand back, then who is to take on the role?

Independent financial advisers are available and have a much better ability to spot and warn against scams than technology firms. However, for a lot of people, the advent of the RDR and its fee-based approach made it difficult to justify employing an IFA, as the cost would use up a significant portion of their savings.

The government seem to want to make tech platforms the policeman for financial fraudsters. This might work for outright theft but not for the more subtle scams. A more effective approach would be to work with technology firms to deal with the twin problems of poor financial knowledge among the population and inability to access / afford financial advice.

Consumer portals that can guide consumers through their choices and help them to understand complex financial products and risks can be a huge help for those who want to make their own decisions and tech platforms are well placed to deliver this education digitally. But a big part of keeping people safe will always be to encourage people to go to financial advisers when they wish to make key decisions about their money. Technology needs to be harnessed to enable financial advisers to reach more people and to be in a position to charge less per consultation. This is the only way that we can get to a point where the consumer is protected by people who truly understand the business.

It is the government that needs to get the message out that people need to be wary of too-goodto-be-true investment offers on social media and to get people to seek advice from regulated providers. Blaming big-tech is easy, but when the government’s mantra is that people know best what to do with their own money is proven wrong, then the government needs to be a part of the solution and not just find others to blame. That’s why its policy should be less about blaming the technology companies and more focused on partnering with them to protect its citizens.