The October price cap rise for electricity and gas will make it easy for those with access to transaction data to identify customers on basic utility tariffs and will provide the impetus for switching.
In 2019, Ofgem imposed a price cap on energy prices in a bid to help people manage the increasing cost of heating and powering their homes. This gets reviewed twice a year and has been increased twice in two consecutive reviews for the first time since its introduction.
The impact in October will be significant, with a 12% increase to the price cap so that an average household using 12,000 KWh of Gas and 3100 KWh of electricity will see their bills increase by around £139 / year (from £1,138 to £1,277). Things will be worse for those on prepayment meters with an increase of around £159 / year based on the same usage.
This is the most significant change since the price cap was introduced and it’s one that will affect a lot of people. It’s been widely reported that around 39% of UK households (11 million) are currently on energy plans that are affected by the price cap (it only applies to variable rate tariffs) and a further 4 million households on pre-payment meters.
It’s also the exact kind of problem that we designed our Open Banking platform to solve. It’s a simple integration to start ingesting transaction data, our ‘Signal’ financial intelligence engine spots bill increases out of the box and our platform's connection with energy switching providers allows for the seamless delivery of switching services within your apps and services. (find out how it works here)
The solution may be simple, but the opportunity is huge - both for the businesses doing the switching and for their customers. The big 5 switching services claim an average saving of around £215 / household for a dual fuel switch, That's £3.3bn in savings for customers if all 15 million households were to switch. For businesses with access to a large customer base, there’s also a significant revenue opportunity. According to testimony (from a parliamentary select committee) given by leading comparison sites, their average commission on a dual-fuel switch is between £50 and £60 per household. That means there’s £900m of commission on the table for businesses looking at revenue share models.
This is one of an increasingly rare set of circumstances where the opportunity for disruption is attractive both to those doing the disrupting and the incumbents. It’s good for the disrupters because the market is significant, predictable and low risk - and to those incumbents with a big enough customer base, it offers a route to creating a win/win scenario where the goals of revenue generation and the provision of a valuable service to customers align.
We designed our platform with this kind of opportunity in mind. One where the missing pieces in the puzzle are the insights built on financial data, and the thoughtfully connected journey delivered as a result. For more info on how we make it easy for your teams to do this, get in touch. We’d love to talk.
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