Future of Work: Building a safety net for the self-employed (#10)

Ben Robinson (BR): This podcast is part of our series on the Future of Work, sponsored by Trezeo. So I’m here with Garrett Cassidy who is CEO of Trezeo, who are building a financial safety net for the self-employed. We’re also here with Jonathan Key who is co-founder of Labour Xchange, a platform to help underemployed people earn more. And lastly, we’re here with Gareth McNab, who is co-leader of Open Banking for Good at Nationwide, which is not just UK’s largest Building Society, but that’s actually also the world’s largest Building Society. Gareth, talk to me about the life, the day to day life of a co-leader of Open Banking for Good.

Gareth McNab (GM): Sure. So my role within Open Banking for Good is many and varied. I am first port of call for the 5 different FinTechs who are part of the program for anything they need out of Nationwide. I am responsible for finding colleagues within Nationwide who can provide support to the FinTechs as they grow and scale their products, services and solutions. I’m also responsible for our relationships with the advice sector and charities who provided us with really, really valuable input from even before Open Banking for Good publicly launched and coordinating the series of workshops that we’ve been putting on for the successful FinTechs who are part of our incubator.

BR: And the five FinTechs, who are they?

GM: Trezeo is one, yup. There are four others who are OpenWrks, Tully, Ducit.ai and Toucan.

BR: And how much of your time is spent on the FinTech program?

GM: So about a third of my week is involved in activities that are directly supporting the FinTechs. About a third of my week is involved in scaling and supporting through Nationwide, and a third of my week is picking up the tasks that fall out of those two, so it’s a full-time responsibility.

BR: Cool. So you have one of the coolest and probably biggest impact jobs at Nationwide, wouldn’t you say?

GM: It’s definitely one of the coolest since I joined Nationwide nearly 5 years ago. I’ve been telling everybody including my Chief Executive I have the best job in the business and he didn’t disagree with me.

BR: Is that a strategy to get better paid or is that…?

GM: Well, my work-life balance is through the roof and job satisfaction is through the roof because I’m on a mission to help improve the lives of people who are financially squeezed, doing what I can to have a meaningful difference to people who live lives impacted by poverty and problem debt, and the fact that I can earn a living to do so and particularly in this innovative way, leveraging the best of FinTech, charity world, and large financial services to help make a meaningful difference to 12.9 million people who are financially squeezed. I’m the happiest man in Nationwide, I think.

BR: So Jonathan, what you’re trying to do at Labour Xchange is the same as Gareth trying to do through his job, which is help those who are financially squeezed, right?

Jonathan Key (JK): Yeah. Completely. We have a self-designed poster. And it says something really simple. It says, are you in a corner? Do you need more money? Take out a payday loan, big red cross. Sell your staff, big red cross. Work a bit more when it’s convenient to you, a big tick. So we share the same mission at Labour Xchange. The only different angle we take is instead of cutting down your costs or claiming more benefits, you can actually have a better standard of life by getting that little bit of extra work that fits around your life. That’s our entire mission.

BR: And just tell us how you started this, the Eureka moment you had when you realized that this was a gap and you could help bring labour that’s under-utilized into the marketplace.

JK: It was when I sat down and I had a grown man in tears in front of me saying he can’t afford to buy his daughter a pair of school shoes or he’s not going to eat that week. And that was off the back of someone who was on 15 hour week contract at the supermarket, who needed more hours to work, but they can’t get the work because their rota changed every Sunday. So he was caught, in a job. So he was a statistic that actually he’s employed. He should be fine, but he’s not. He’s earning far, far too little money and he can’t do anything to top it up. And having previously run a catering company, I know there’s lots of companies out there who needed him for certain hours.

So it wasn’t so much a Eureka moment as a cliff edge moment I jumped off, and I realized actually for a lot of people there is a very dark chasm and they’re trapped in it. So what Labour Xchange does, it’s basically a ladder out where a person can, on an hour by hour basis, say when they’re free and then business is tap into their time. So you create that win/win. They get the work, the business gets the extra staff and we work on the basis that no one is lazy. Very few people in this country are lazy. They just haven’t got the chance. But businesses aren’t evil as well. Give a business a chance to do the right thing that doesn’t screw over business and they will, and that’s what Labour Xchange does.

Just because you’re self-employed doesn’t mean that you’re a second class citizen. You should have the same benefits and packages that an employee gets and that’s where Trezeo comes in. — JK

BR: And so for somebody like that gentleman you were re talking about whose rota changes every Sunday… when that person knows their rota, then they list the free hours that they have…

JK: And that’s all they do. One of the things where we have on our platform is very little written English because we’ve realized that is a massive barrier for people. So he lists when he’s free next week and it could be one hour. Now previously a recruiter won’t touch him and most work platforms won’t because you can’t make money from that one hour but because we’ve automated everything, we can. So he lists it for one hour or two hours or five hours when he’s free, and then when a business has a demand, they search for the hours they need. The people come up and they click ‘book’, and it’s that simple. There’s lots of people want the work and there’s lots of businesses who need the staff. Why aren’t they connecting? And that’s what we do. We help that connection.

BR: Perfect. Gareth, so the connection with Trezeo is because Trezeo works on the Nationwide incubation program. And for you Jonathan, the connection with Trezeo is you’re now looking to adopt the Trezeo service for the users on Labour Xchange?

JK: More like we are adopting it.

BR: You are adopting, okay.

we can effectively get to a point where people don’t have to trade their kind of flexibility for financial security. — GC

JK: Because there is a substantial need for people to be supported. Just because you’re self-employed doesn’t mean that you’re a second class citizen. You should have the same benefits and packages that an employee gets and that’s where Trezeo comes in.

BR: Garrett, if you wouldn’t mind just elaborating on what Jonathan is saying there.

Garrett Cassidy (GC): So the real key piece here is as people shift from traditional employment or mixture of employment and self-employment, they’re leaving behind what a lot of employers would have provided in terms of your holiday and sick pay and then also workplace insurance and pensions and all of that kind of thing. And also the fact that they then, in that model, they fit into what the system expects, whether it be banks, building societies. They fit the traditional model of what a worker is and therefore can access products. By stepping into self-employment, they step off that. They effectively step off a cliff and lose those protections and lose the fact they no longer look like a customer that banks can service. So what we’re really trying to do is rebuild that almost from the ground up, starting with helping them manage their cash flow through variable income, but also importantly then starting to add the protections like personal accident insurance, income protection type disability insurance, so that if they do have an accident that causes them to be out of work for long term, they’re protected, and building that towards longer term savings and pensions and things like that in the future. So that we can effectively get to a point where people don’t have to trade their kind of flexibility for financial security.

There’s a positive thing around the generation that’s entered the workforce in the last 5 to 10 years through platform work and so on and self-employment can really, really suit, but I think it’s also a fallout from some social policy changes at government level in terms of benefits and employment rights. And I think one of those is a very, very good thing, and the other one is one to watch very carefully. -GM

BR: So I just want to take a slight step backwards. So the thing that unites you and is that you are focused on the world of self-employment, and would you agree that there’s a structural trend towards greater self-employment and what is it that’s causing that shift? So maybe Gareth, you could start us off.

GM: So I think I would agree that there’s a structural thing there. I think that it’s a good thing and not so good things driving that. I think the good thing would be to tap into the trendy millennials and generation Y, Z or whatever we’re up to is like that, and there’s a generation that’s recently entered the workforce who wants to believe in a cause, change the world, make a living, provide for a family and realize that their grandparents used to be able to do all of that from a job for life for the local authority, retiring at 55 and getting a pension, but actually over two, three generations, that’s totally decayed and they’re probably not going to be able to find a job that aligns living for a purpose, changing the world and paying my bills and providing for my family.

And they’ve got to want to/need to balance all of those four very important drivers, probably by either dipping in and out of various types of work and deployment of their time in a week, or they might give two years to this and two years to that and two years to that, so they’re not going to have the kind of career arc that maybe the four of us have had before we started FinTechs and staff, maybe the career arc I’ve had, and many of them would say that’s a good thing.

It means that they can divide their time across their interests and still earn a living. They don’t all need to be lonely artisans up in a garrage somewhere on working on their art. Actually they can meaningfully pay their way through life and make a real difference. Alongside that though, there is the driver of larger and larger and larger employers not necessarily advancing the same rights for their workforce and seeing opportunities where the benefits system 15 years ago had that cliff edge on 15 hours. So actually we can offer lots and lots of 15 hour contracts and people will flock in for those and they won’t want the 16th hour. We can look like we’re making a dent on employment numbers, but actually it just suits us as a massive corporate to have a low cost base on our workforce. So I see — this isn’t Nationwide analysis. This is me — I see there’s a positive thing around the generation that’s entered the workforce in the last 5 to 10 years that platform work and so on can really, really suit and self-employment can really, really suit, but I think it’s also a fallout from some social policy changes at government level in terms of benefits and employment rights. And I think one of those is a very, very good thing, and the other one is one to watch very carefully.

I’m quite passionate about is the modern argument that the world of work is changing more than it ever has. I actually think it is a fantasy and I think the world of work has been changing dramatically for the past 30 years and we blame technology that it has exasperated it, but it has not. — JK

BR: And Jonathan, going to you, what do you think is the relative balance between the — it’s crude to say — the good form of self-employment and the bad form of self-employment, but you know, picking up the idea that there’s a positive and negative. And I think you might argue there are demographic aspects too, right? So depending on regions of the country, maybe gender. So what’s your view on the relative balance of good and bad self-employment?

JK: Before I answer, I just want to go back slightly. Because one of the things I’m quite passionate about is the modern argument that the world of work is changing more than it ever has. I actually think it is a fantasy and I think the world of work has been changing dramatically for the past 30 years and we blame technology that it has exasperated it, but it has not. So I started this business off the back of someone on a fixed hour, 15 hour contract so there’s always been this supply and demand kind of thing, and actually I think people were more exploited on zero hour contracts and 15 hour things because it was very fixed. The business got everything they want. So I think we’re actually in a period where we have an opportunity to make things better than what they were. I actually think the flexibility can be there.

So the demographic on our platform, 30% of people are over the age of 55 so it’s not just the young people, and we focus purely on blue collar workers because generally they are people who get forgotten about because you can’t make a lot of money from them. So they’re not people who want to — let’s say changing the world isn’t on their agenda. It’s actually having a balanced good life where they can bring up their kids and they can do that kind of stuff. Now there is an opportunity there for those people. There’s an opportunity there for businesses to use those peoples’ time, and there’s an opportunity for those people to use their time in a way that they want. Now for first time I actually think in 50 years, we’re having an honest conversation and we can make it work for everyone.

I think with the technology we’ve got now, we can shape the world of work where it does work for everyone — JK

Where it hasn’t been, I think this is a complete fantasy. There’s been a lot of people in part time work who wanted full time. There’s been people in this kind of contract where actually, I think with the technology we’ve got now, we can shape the world of work where it does work for everyone, but self-employment can be used as a way to cut costs because you don’t pay an employee’s National Insurance contribution. You don’t pay this or it can be a way of giving that flexibility and through companies like Trezeo, you can have that support package as well. If you look at self-employment as a way of cutting costs, for want of a better word, the country’s up Poop Creek without a paddle. If you look at self-employment as a way of actually getting the workforce to where it needs to be in a way that helps industry but also helps the individual, then I think it is sunny uplands for everyone, but we’d have to take that bold approach.

BR: This idea of … because I 100% agree with what you said, which is I think if we were to portion of a percentage of blame for this situation at the moment, I think technology only accounts for a small part, would you agree, but if we can use technology to change this situation from being zero sum to positive sum where, self-employment is empowering. Self-employment brings autonomy and flexibility, but it doesn’t mean sacrificing that bundle of traditional benefits. Then it’s very much a positive sum game and that’s… so Garrett, I just want to hear your… I think is was is driving your mission.

More and more platforms and companies who engage self-employed workers are seeing that actually if they’re going to have these workers in the future, they are actually going to have to move up and actually provide access to the supports necessary. — GC

GC: I mean this is what’s driving the mission is the piece around effectively putting self-employed in control of that and more importantly giving them the tools so they can be in control, because without the tools, they spend most of their time just trying to manage their money week to week, trying to understand where it’s coming, where it is, and really struggling so first of all, give them the tools so they can manage better and then give them the access to other products. And what we’re seeing very clearly is people need workers. That’s driving companies to do things like Labour Xchange in terms of taking a very enlightened view and saying these are protections that workers on platforms should have. More and more platforms and companies who engage self-employed are seeing that and seeing that actually if they’re going to have these workers in the future, they are actually going to have to move up and actually provide your access to the supports necessary.

But it’s in a different way because these people work for multiple different places in multiple different ways, you can’t just attach it to the company who are providing the work. It’s really difficult for them to provide those services because you end up then with horrible fragmentation. So it needs a world where those kind of services actually live with the worker themselves so they can pick what’s right for them, and over time we will, and we’re already starting to see it. We’ll see companies starting to contribute to them, like traditional employers would have, but giving the worker the control to pick what’s actually important for them and be able to aggregate and top off as necessary.

BR: So the idea of giving the worker more control, more tools, this will sound sort of very admirable and it feels like we’re moving in the right direction by doing that, but at the same time, I don’t think we want to devolve all responsibility to the individual because this has to be a collective effort to rebuild the safety net. So I guess starting with you, Jonathan, what’s the role of platforms in this? What do platforms need to do to empower individuals to be able to better provide for retirement and rainy days and accidents and all the other things that they would’ve got as part of an employment contract?

All these platforms, they’re going to get into a situation where they’re gonna run dry of working people unless they up their game. So they’ve got to take a lead in saying, yes, you’re self-employed. But we have got to provide a base around that self-employment where you are supported — JK

JK: Weird connection, but there is a point to this, honestly. During the financial downturn, there was substantial less redundancies than what everyone thought, and the reason is companies realized that actually good staff are hard to come by. They prefer to take a financial hit and keep the good staff. Now all the platforms, they’re going to get into a situation where they’re gonna run dry of people unless they up their game. So they’ve got to take a lead in going, yes, you’re self-employed. But we have got to provide a base around that self-employment where you are supported, and that’s exactly what our mission is that yes, you top up your income but actually you’re not left by yourself, because I always gone about bandwidth. When you’ve done 45 hours a week, your bandwidth is limited. You’re not going to wander off and find this is poor package. We have to be honest and we have to say you have a responsibility and even if they’re not your employee, you have a responsibility to that person because they are using your service and you’ve got to support that. And the platforms who don’t do that, it’s going to be like a desert wasteland for workers going on there and they will fail.

BR: So implicit in your answers is the idea that effectively platforms will have to self-police because otherwise there’ll be sanctioned by the market. But when I look at your platform, I think it’s got some really interesting and really positive characteristics. For example, you’ve got an element of data portability, right? You’ve got the ability within the platform for people to build their own profiles and therefore to bid up their own hourly rate, and I suppose you’ve done that anticipation of the fact that it’s going to become harder and harder every time to attract the best workers. So you wouldn’t advocate therefore that those kinds of platform elements to be standardized and made sort of obligatory if you like, across platforms?

JK: I think if you did that it’s like bludgeoning something to death. You do legislation and… let’s be really frank and honest, the people who start tech companies are some of the smartest people I know, and they will always be five steps ahead of people doing legislation and I think we need to be honest about that. So what we need is a collective thing where as a society, everyone comes to them and actually there is a push on standards because that’s what we want to do, not because we’ve made a law, because there will always be a loophole around that law — always — and someone will always find that loophole. So if we push in that direction, then these people are gonna have no choice. Everything will get better and I really do see that. We always talk about race to the bottom. I think it’s going to be a race to the top. So our on-boarding costs for individuals are pennies. So we have that as a market advantage over any other platform and that’s cause people get treated better, and the more we do things like support them, the more they get stuff like that, the lower our on-boarding costs are gonna be and the more of a market advantage we’ll have.

BR: Gareth, what’s the role of financial services providers like Nationwide in this new world of self-employed? Are you merely providing a sort of intermediary, aggregated service to link people to products like Trezeo, or is it a financial literacy type relationship with those customers? What is the role of Nationwide in helping these new self-employed people navigate this new world of work?

we don’t really know how to describe these self-employed people who aren’t quite self-employed, are they gig or are they platform, are they topping up? What are they doing? Well, they’re kind of in the middle of being personal customers and business customers, and rather than trying to force them into the categories we have currently of financial services, there’s an opportunity to work out what we do in the middle while the regulator also pays attention to underserved segments of the market. -GM

GM: I think the role of financial services in the main is to see this balance between opportunity and responsibility, which I’m hearing a little bit in what you’re saying Jonathan, and in your pushback that it’s not that there’s a responsibility on platforms, there’s an opportunity that is they take it now, they can actually shape what this regulated framework would look and feel like. And then if consumers and workers need the protection of that being formalized, well here’s the thing that’s working for the top three platforms, codify that then everybody gets good standards. And I think similar within financial services, there’s a balance between responsibilities on us. When you see segments of a market not being able to access and navigate that market effectively, like the self-employed — there’s a number up in our office, something along the lines of 6% of the self-employed access the insurance market compared to high 50%, 60% of full time employed of any type of insurance.

Now when it comes to keeping a car on a road, there’s a legal requirement. When it comes to keeping your contents insured against theft or fire or whatever, many people see that contents insurance is an optional extra that I can’t afford or I can’t be properly risk priced for that or that I don’t need to have, but that shouldn’t be a choice you feel forced into because the market can’t price you properly. That should be an active choice you made knowing all the factors and the financial services firms you went looking at, knowing all the factors about you too. That should be a choice. You’re not compelled to opt out of mainstream insurance market.

So there’s a responsibility to make sure no single segment of the economy goes under-served or without access to the financial services products we all need to survive and thrive. Sounds like I’m quoting a song, doesn’t it? But then there’s an opportunity I think to work out what that actually looks like. We have a very active regulator in financial services who doesn’t mind being relatively interventionist when it suits them and that’s a good thing for consumers, and I think a good thing for financial services and it gives those forward thinking financial services firms the opportunity to, as I’ve suggested, platforms might want to… to pre-empt that regulating push, spot this gap that’s kind of in the middle of is it personal current account banking with a couple of added services? Is it business banking light? What is it?

Well, we kind of don’t know because we don’t really know how to describe these self-employed people who aren’t quite self-employed, are they gig or are they platform, are they topping up? What are they doing? Well, they’re kind of in the middle of being personal customers and business customers, and rather than trying to force them into the categories we have currently of financial services, there’s an opportunity to work out what we do in the middle while the regulator also pays attention to underserved segments of the market. So, I think what we’ve done with Open Banking for Good, taking a new technology, inviting new FinTechs and offering some support to help them develop the services and products that they are. It’s a really good example of how you stimulate interest in innovation in that middle space. It gives a really interesting challenge to us Nationwide as sponsors of the program, but also to wider financial services to say, hey, there are products growing here, services growing here, there’s a need here. Now whether an untapped need is a market draw to you, or the potential regulatory pressure in the future is a draw to you, whichever floats your boat, mate, come on in and let’s work on building something that works for this middle group of people.

BR: And what is your role there? So is it about helping customers to discover these new types of services?

GM: Good question. You did ask about financial institutions… I have a personal bias against any suggestion that information remedy is a good idea — giving consumers more information they will make better choices. Well, that puts all the blame for their choices on the individual consumer. And Jonathan, you already mentioned bandwidth, the financially squeezed have the same problem, whether they work 45 hours or not. If they’re taking any serious time each week to balance their weekly income against their monthly outgoings and make that fit… that’s not something I’ve got to do. I get paid monthly, my bills get paid monthly, everything works fine for me. So, I’ve got space to day-dream about paying for my kids to Uni, where am I going to go on holiday next year, my AVCs or my pension. That same bandwidth that I have available for my long term financial planning, the self-employed or the gig-worker doesn’t have available to them, even though they may have the money, the financial literacy or the wits about them to do so… they’ve exhausted that bandwidth on making the day-to-day and week-to-week work. So there might be a connecting role to play…

BR: Yes, and you’re providing that bandwidth by recommending the right products and services…

GM: Yes, so when tech can lift some of that joining the dots between my weekly earnings and my monthly outgoings then it releases the rest of the bandwidth for humans to flourish and do what they’re great at, which is making human connections, and dreaming about the future and chaging the world. Or at least their bit of the world. I think there is a bit in terms of working to design products that work, there is a little bit about making sure our members as Nationwide and financial services industry as a whole is aware of the products and services that work.

I think there is a lot of work to do before that in terms of surfacing the need. Doing things like Trezeo-Labour Xchange engagement, doing things like Open Banking for Good, doing things like your podcast to help raise awareness of: “look, these aren’t the zero-hour zombies of the early Cameron years”, these aren’t the Conservative party statistics on how they managed to persuade everybody that we’re nearly at full employment. These zero-hour isn’t a bad thing, that the Labour party might people feel like actually there’s some people feel full-forced into this and there’s many people who have made an active choice, we can’t not make this work for humans, so let’s make this work instead of going back to the 60s.

So, I think there’s some stuff there, I’m resisting to the idea of just flagging Hey, have your heard of Trezeo, have you heard of this, have you heard of that?

I think there’s definitely a role… does banking move into being a platform? There’s some arguments that say it should go that way. Banking is either going to need to go to towards being a platform that other services sit on, or it’s going to create its own services that sit on other banks’ platforms… and in the world of Open Banking, that very much is the future ecosystem. One of the reasons why we initiated the OB4G program in the first place, our Chief Exec described Open Banking as the Uber moment for financial services, from this point forward, financial services look totally different forever. And we want to make sure that we’re don’t have these new products and services done to us, we want to be participating in the creation and fostering of those services and products.

I think it’s important that banks and institutions like Nationwide are open to the fact that things have changed. Workers don’t fit into the boxes that they traditionally fitted in. And either it’s opening up to that and recognising that it’s a very different proposition, or it’s the platform approach of bringing third parties in who can do it. -GC

BR: What do you think, Garrett, be the role of institutions such as Nationwide in helping self-employed people to navigate better their financial management?

GC: I mean the key piece here is, certainly in the UK and most developed markets, these people are banked, so they have bank accounts, but they’re underserved beyond that because they don’t fit in the matrix. I think it’s important that banks and institutions like Nationwide are open to the fact that things have changed. Workers don’t fit into the boxes that they traditionally fitted in. And either it’s opening up to that and recognising that it’s a very different proposition, or it’s the platform approach of bringing third parties in who can do it. So banks, insurers etc. would’ve traditionally dealt with a large employer to help them, particularly on the insurance side, some of those products we’re sold through the employer, that’s how they would get to people. That traditional employer isn’t there anymore, and even the platform cannot play that role now, because we’re no longer in this singular I work for somebody for life, I have one job. One approach is get everyone of the new platforms to do the same as employers do, but that doesn’t work because you end up with massive fragmentation and you end up with all sorts of unexpected gaps.

So I think the first bit is to recognize, that the world is changing. And I agree with Jonathan, it’s not this year or last year, it’s been changing for a long time, it just has accelerated. And also, the whole platform discussion on the bad side has probably brought it to the surface, which isn’t necessarily a bad thing, it was brought to the surface to actually be addressed. Something that in reality was slightly below the surface for a long time, self-employment has been around for a long time, some of the shark practices have been around for a long time, there’s now some very large things that people can focus on and think how can we fix this? I don’t think there’s one simple answer, though.

BR: The reason I ask is because I think it’s a two way street, with a financial services company like Nationwide, because you want a route to market through those guys, because they’ve got millions of customers, but in the same time is not just that you might want as Nationwide to offer the Trezeo service, it’s also that if you’re going to be able to sell some traditional financial services, you almost need a platform like Trezeo to get those self-employed people in a shape where they become bankable for some of your products, right?

GM: It’s been one of the ideas behind Open Banking from the beginning. As a lender, does having access to someone’s full suite of current accounts help you assess them for lending, does it help you lend to more people, more quickly, does that help you give quicker declines if something is not there? And that’s probably right for some parts of the market, but again, that’s going to help people with money and choice, where more money accrue more choices more quickly. I think it will help some people who are on the margins of affordability, checks aren’t lending but, just the sight of all the current accounts won’t necessarily help mainstream lenders who have set risk scorecards and matrices make sense of gig-workers’ fluctuating hours and work on different platforms and mechanisms of payments. So I think, there is room for lenders to loosen up and get to grips with how do you risk-assess these new types of people, and at the same time as we’re learning those lessons, partly through Open Banking technology, there’s got to be room for income smoothing.

Everybody deserves to be able to think and to plan for their future — if they choose not to, it’s a choice — but they deserve the right to do so. But until you’ve got your income smoothed and some kind disposable income identified and the market has created products for you, it’s not really a choice, is it? The self-employed goes without a pension, the self-employed goes without some of the insurances and the important personal and family protections that the rest of us have. That’s an awful lot of families that are going to be going without something that 20 years ago most of us would’ve got. That’s not quite right. — GM

BR: So we interviewed some of the Trezeo users today, and a common theme was that Trezeo is helping them to build a credit score, because it’s providing credit, and it does so without doing maybe some of the ex-ante checks that atraditional lender would do… so that’s what I meant by, once they have that credit score through Trezeo, they then become eligible for the kinds of let’s call them higher value products that Nationwide could offer them. So it’s almost like Trezeo isn’t just seeking a route to market through Nationwide and providing a service that might be useful for income smoothing, it’s also getting those individuals into a… creating the sort of necessary underpinnings for them to be able to access a broader range of financial services.

GM: Yes, the sooner it looks to us as a lender like you have a steady disposable income and the sooner you have the realisation of that as a consumer, or potential borrower or potential insurance purchaser… the sooner we both have that awareness of your budget that you have, an amount of affordability and you have a need that you need to meet… we can more quickly build products and services that would meet those needs, because we could see what’s affordable to be able to pay, and that comes with the greater visibility that Open Banking provides, but also comes with the greater awareness that Trezeo gives to you as a consumer: I do now normally earn this much, I do now normally this much spare most weeks, when I don’t, it’s smoothed out to me through a savings buffer or credit or whatever, and now that the bandwidth problem is probably also sorted, I can day-dream about beginning to save towards a deposit. Now pension might may seem full-time, traditional employment have, I always thought I couldn’t have because I’m self-employed. No, no, no — you can have, you’ve got some bandwidth and you can go and search the market. And by the main banking providers being involved in that we can help get to more people, more quickly to help them engage in those kinds of products. Because everybody deserves to be able to think about their future and choose to plan for their future — if they choose not to, it’s a choice —but they deserve the right to choose about planning for their future. But until you’ve got your income smoothed and some kind disposable income identified and the market has created products for you, it’s not really a choice, is it? The self-employed goes without a pension, the self-employed goes without some of the insurances and the important personal and family protections. People in full-time employment are worth a lot of money, 5x-6x their salary, plus death and service benefits and things like that, and that’s without parting with any buy to purchase any other kinds of protections.

That’s an awful lot of families that are going to be going without something that 20 years ago most of us would’ve got. That’s not quite right.

So I think it’s not just on us to be able to have a greater visibility on your finances, it is on new products and services like Trezeo to smooth some of your finances, to make it a bit easier for the incumbents in particular to be able to score you for mainstream products.

It’s the case that the benefits and the services follow the user, instead of the user trying to access them. That’s massive. So if you looked at income flattening before, if your wages dropped, you’d have to apply for a loan, it’s a very binary process: this has happened. Where now, what you’re saying is that the benefits follow the user, so wherever they go, that benefit is with them. And that’s only because the technology is here. -JK

JK: Can I jump on this… I see this as one of the beautiful things that’s happening with tech. And you touched on this. It’s the case that the benefits and the services follow the user, instead of the user trying to access them. That’s massive. So if you looked at income flattening before, if your wages dropped, you’d have to apply for a loan, it’s a very binary process: this has happened. Where now, what you’re saying is that the benefits follow the user, so wherever they go, that benefit is with them. And that’s only because the technology is here. Because those insurance packages, you’re right Garrett, they’d sell it to the company, and the company gives it, but because it’s paper based it’s expensive, where with technology, and stuff like Trezeo is doing, it follows the user. So suddenly there’s a whole raft of services and stuff that people could access, seamlessly throughout their life. And it’s an ideological point of view, so is it a case that the user comes to us — a binary decision process — so is it a case that this is there for them and it follows them around?

BR: So I see how this relationship works — I’m point to Garrett and Gareth — so I see a mutual benefit for you guys to work together. But how does an individual through a platform like Labour Xchange get access to something like Trezeo? Is it an opt-in service, is it a way for employers to make themselves more appealing? Is it white-labelled, is it branded? How practically does something like Trezeo gets accessed by users?

JK: So the first thing we’re doing with Trezeo is for the Care sector. And we’re approaching it as a This comes with our platform, so you get access to this. And that’s built into our cost model with our local authority partners. And there’s a reason for that, one is that Care has got a really bad reputation, there’s not enough people, so anything you can do to make it better. But if you look at the nature of domiciliary care, it’s actually a very self-employed industry. So you go to someone’s house there, and you go to another person’s house there. So actually who’s the employer? This is my personal opinion, so apologies if it offends anyone, but you have an agency sitting in the middle, who make a lot of money from what is technically a self-employed relationship, by making them an employee, they take a lot of that pie. So if you can accept that it’s a self-employed relationship, but put those benefit packages in, so they get everything that an employed person would be, it’s a win-win, because the money is there to do it.

And for the rest of our user base, it’s opt-in. But at the moment we want to start on that: It is there for you. And if that works, then I think that would be the future.

BR: I think, in the way I’ve already addressed this question, but I still think it’s worth revisiting… it seems that we’re generally in favour of market-based solutions to these problems. But if we think about things like pensions, can these really be completely self-services through platforms like Trezeo, or does the government need to change legislation, nudge people… I suppose the question is: is the government doing enough to create the framework for individuals to access, find and use the services that they need to provide for unemployment, holidays, savings and retirement?

GC: There’s probably two things that are going on there. One is, here in the UK, after auto-enrollment which has had some success in the journey of getting employees engaged with pensions, one of the big focuses is the fact that the self-employed are not engaged with pensions and pension coverage is falling as self-employment grows, traditionally a lot of self-employed used property as their nest egg… that’s obviously becomes more and more difficult for newer generations. Certainly the government here, when it comes to pensions, have been doing a lot of work on this over the last few years in terms of not just solving… obviously, the simple answer should be well, all platforms, everybody that pays these people should also give them some money for pensions, but actually you got to make the products work first.

So what they’ve been much more focused on, and also in this environment, who is the enroller as it would be in the employment space, and how do you avoid the issue that these people work for different sources of income, they might not hit the threshold on any of those and just be left with nothing. So what they’ve more focused on initially, is doing testing in the market on first of all attitudes to pensions within self-employed. On the back of that, most people do recognize they do need a pensions and don’t have one, but also what is it that would help people get into them?

And one of the big reasons is variable income, if you’re trying to do a private pension, it would traditionally be a fixed monthly contribution. At any income, with variable income, that causes a reaction Actually I’ll do it once per year, but then of course they don’t do it. The other one is the whole concept, because they don’t have the other safety nets of locking the money away forever. So finding semi-liquid solutions that actually people can access money. But also another reason is, actually if a self-employed person wants to go and get a pension, they’ve actually gotta go and find a financial advisor, even online, and go through quite a complex process that takes a lot of brain space. If you’re an employee, even pre auto-enrollment, you’ve had a fairly straightforward method, to just go and say Actually I want to contribute, payroll please contribute for me. So, when we think about pensions, we think about all of those, why should somebody have to make a fixed monthly contribution to a pension, and why can’t self-employed have access to a simple occupational type pension like employees? And yes, then when they have the headspace to think, they can engage with the pension and actually start thinking about what do they want, do they want to think about different investment strategies and things like that? But actually, a lot of self-employed people, are mid to low earnings, actually just getting some savings going on is important. And also working out what are the things you could do by combining whether it’d be savings products with pensions, or whether it’d be even just not thinking about pensions but using things like, in the UK, something like lifetime ISAs which might be more suitable for people, and just try to think differently about it, and then test with customers.

I think one thing that is emerging, there’s nothing today in regulations that’s stopping us from doing that… so it’s just a matter of trying to find way that works, seeing it work, and then see well actually with other things that government and policymakers can change, because there’s no point in going to them with an idea. If we get something working and prove that it’s working, it gives them a template to actually take that forward.

BR: Your description of government activity sounds like they’re becoming a platform as well, right? In a way… because they’re adopting platform type approaches to innovation, small experiments, testing…

GC: Yes, so they’re engaging with the industry, but not just traditional large financial services firms, they’re engaging with Fintechs as well around how to find a different way, they’re engaging with representing bodies, associations on the pensions side, to try and work out what are the different initiatives that might crack this. Because self-employment is a fairly broad sector, we’ve got the platforms, all the way up to higher earners and professionals, and different solutions will be required for different sectors.

BR: Gareth, What about the regulators. The regulators have been quite progressive / aggressive in forcing the industry to open up. You would argue that regulators move fairly quickly, right?

GM: I’m pretty supportive too on the FCA and their to approach to sandboxing and so on… they absolutely understand that the regulations that have been built up over 15–20 years probably themselves aren’t quite enough to help you as a financial services company or you as a fintech build products that definitely work, in a very regulated environment. So why not come into the sandbox, build it right in front of the regulator who will work with you to construct the advice and they’ll give it to you as you go so they can build the regulations of the future based on the innovations of today.

BR: And do you think the UK regulator is particularly progressive?

GM: It’s the only regulator I know anything about. [Laughter] That approach, when you compare FCA with regulators of other essential services and industries in the UK, I think they are clearly the most focused on vulnerable customers which many people in this gap would fall into. Certainly their income is volatile enough that at any one point might be in trouble eventually. I think they’re the most forward thinking in helping the industry that they regulate to innovate. I think in other industries some first would find themselves in fear of their regulator rather than finding them a co-collaborator in building future products and services to help the customer base. I think the FCA are a good example of a regulator here.

GC: If we’re taking an example of something they’re working on at the moment. Almost going beyond their core regulatory piece, they’re doing a big piece of work on inter generational finance, what does it mean?, how does the financial industry need to evolve as the generations shift, as self-employment and gig work becomes more prevalent, as more and more are in that space without the protection etc. So they’ve been doing a big discovery piece with industry, both financial and non-financial industry, what does that mean for the future, so that they can start thinking about their regulations and if there is change required to help that as it evolves over the next 5–10 years, they’ve started to look further out.

JK: Sorry, if I can just try to read the analogy. My parents’ generation were told, and they really did believe that through their National Insurance there was an individual pot of money for them, for their pension and sick pay that followed them around, which is a gigantic lie — it’s just a tax—but actually for the first time ever there is an opportunity for that to be what it is. Everyone has this benefit that follows them around. So we’ve had a lie for the past 100 years that this what the situation has been, and it hasn’t, but we have an opportunity to make that reality.

BR: Penultimate question, Jonathan… so you strike me as not just an optimist, but someone who is actually working day to day to fix some of these problems. All of us have talked about how these problems have been gradually evolving over time, and all of us have said that they have now come to a head and we’ve starting to deal with it. So, how did it come to a head and do you think we’re dealing with it urgently enough?

JK: How did it come to a head? Basically because enough people are in pain. Actually, the people we’re talking about and I’m passionate about, let’s be honest, are ignored virtually by everyone. The chances are they’re not likely to vote because their time is taking up. They haven’t got a huge amount of money to spend, so you can’t sell them loads of stuff. They’re struggling day to day, they’ve been ignored for a very, very long time. And what we’re seeing is a world falling apart at the moment, because there is a lot of ignored people who are struggling. So I think that is what helped bring it to head. Brexit, Trump… they are people crying for help, the life I expected isn’t here, please help me!

So I think it’s quite good that suddenly we’re waking up that well, these people exist! People who’ve got mould on their room, all over their place, and the landlords aren’t fixing but they can’t afford to move out. No one has voiced these people! And we have to think is this the society we all want? Because it’s falling apart in a lot of ways.

And on a positive point of view, we are having this conversation, and we can shape the future, where we can go it can be inclusive, it doesn’t have to be like now. The way I equate this, McDonald’s have banned plastic straws because people went: this is not good, ban plastic straws. Collectively we can achieve a world where work should be decent, fair and people should be supported. And we can do that. I haven’t met a business owner who is a bad person. Who wakes up in the morning and goes how can I exploit staff today? And I haven’t met people who are lazy going I’m not going to show up to work. So if you work on the basis that you’ve got employers who want to do the right thing and you’ve got people who want to work hard, the rest is actually quite easy. We just need to make it happen.

BR: Ok. This is the final question, the same to each of you. One of the themes we like to pick upon in this podcast is one where we think, a bit like you said earlier on, we think the whole notion of tech backlash, tech pessimism should be debunked because there’s no reason why should necessarily follow that tech should lead to worse outcomes. Because I agree with you, tech is in the hands of people, people are generally good, right? So from each one of your perspectives, tell us why you’re optimistic about the future. Starting with you Garrett…

GC: I think one of the key things tech does is, used right, it enables solutions to be provided to these people at a granularity that actually wasn’t possible in the past, and it’s one of the reasons they were ignored because they were never a profitable customer base, because they were too different and too dispersed. But technology allows you to shift the costs of servicing them so dramatically that you could do things differently. And that is using technology and data correctly and ethically, for the customer’s benefit.

GM: I think as a risk of technology being the main way that these benefits are deployed is that people who aren’t as connected with technology or digitally-savvy are going to be left behind. I think the reason I’m optimistic about the future is that technology isn’t the thing that everybody is being a big nay-sayer about anymore, they kind of accepted that it’s here to stay and it’s coming even more, how can we make sure everybody’s included so at least they’re asking that question. And you’ve got people’s organisations committed to keeping the local branch networks open, because local communities need physical presence in the high-street. You have organisations thinking about how can we make sure that if not everybody has broadband connectivity in their home, at least have access through the high-street and things like that. I’m optimistic because consumer groups are no longer saying boo-technology, no, is bad, but are now saying yay-technology, how can we make sure all of our client base are included, so they are engaging with it differently. And I think they as consumer groups and the consumers they represent have some of the answers within them: business, society, civil society can work together to make sure nobody gets left behind if technology does help bring the future in.

JK: Hmm… I’d probably say Cadbury’s.

BR: Go on…

JK: The industrial revolution brought massive change. You’ve had some bad factories, you had some good factories. And you’ve got people like Cadbury’s. They were very forward-thinking. And they built towns and villages for their people and looked after them, and actually they’ve thrived because of that. So yes, the industrial revolution shook everything up, but by people doing and leading the right way they had profitable businesses and drove society in the right direction and I think we’re in that point again.

BR: Great! So to summarize, it’s obvious that we’re going through a massive structural shift, but there are plenty of reasons to be optimistic that at the end-state of this structural shift things would be better for everybody, but particularly those people that have been overlooked and ignored for a very long time. Gentlemen, thank you very much for your time, that was a great discussion.

All: Thank you.