How too much transparency turns into opacity

A shortish, dullish and technicalish blog, this, but I thought I’d quickly mention a point which I hadn’t considered until it came up in a meeting yesterday.

I guess pretty much everyone involved in the RDR would agree that if greater transparency is one of the consequences for individuals – in other words, if individuals can see more clearly and precisely what they’re paying for the various elements of the services they’re receiving – that’s pretty obviously a Good Thing.

(In fact, this transparification process has taken a significant step forward this very morning, with my good friends at Cofunds announcing their new “unbundled” charging structure, to be introduced next year in the run-up to RDR implementation on 1 Jan 2013.)

The point that was new to me – maybe it shouldn’t have been, but it was – is that with all sorts of organisations having different “unbundled” structures, with no consistency about what is and isn’t charged for, the overall effect is complete confusion, opacity and un-comparability.

It’s a problem that we encounter all the time in other markets. When it comes to motor insurance, for example, is a premium of £500 a year with protected no claims, a £100 excess, free windscreen replacement, courtesy car and free legal expenses better or worse value than a premium of £450 a year with unlimited free Green Cards, a £200 excess, and a first-year offer of 13 months’ cover for the price of 12? Or with mobile phones, is a 12-month contract with a free iPhone 4, 500 texts a month, free daytime calls within your own network and a flat rate of £35 per month better or worse than an 18-month contract with a Samsung Galaxy, unlimited texts, free calls to UK landlines at weekends, half-price insurance and call charges from 1p a minute?

The point about the preceding mumbo-jumbo is that it’s simultaneously a) completely transparent and b) completely opaque. At the opposite end of the spectrum, imagine a completely flat-rate, “one-number” tariff, which says for example that your phone will cost you £50 a month no matter how many calls you make or texts you send, no matter when and no matter to whom. A tariff like that is completely opaque – you have no idea how the £50 figure is made up. But when it comes to comparability, it’s completely transparent – it’s not hard to see that it’s cheaper than a £55-a-month tariff, and more expensive than a £45-a month one.

Funny, isn’t it. Everyone agree that transparency is one of the biggest, most valuable and most important new customer benefits that’s going to be available in the brave new financial world that we’re busily spending billions on building. But you can make a more-than-respectable case that actually, it’s a move in completely the wrong direction.

2 thoughts on “How too much transparency turns into opacity

  1. George Orwell is sort of coming back into fashion, though he was never exactly cool or hot, for noticing long ago the opacity/transparency divide – veracity/rapacity and so on. Soon, you’ll need to prove you have 50,000 nicker in your top pocket just to walk into a bank and make a withdrawal of your own money, say a tenner, to buy some gin for the kids to get ’em to sleep while you worry. Thank Golly the chinawall is ringfencing the casinos from the banks into which such cashrich people will ostrichlike walk, well, scuttle, to beg for their own money, which is itself diluted by the hour, the more they invest, the more they more and the less they less, et cetera. Myself, I am off to the Congo in search of gold.

  2. Aren’t you muddling up “transparency” with “inclusivity”. When it comes to what you pay, the all-inclusive £50 price isn’t less “transparent” than the more complex plan.

    Or maybe you are muddling price with cost, thinking that the £50 option is opaque because it doesn’t tell you what the various components cost. But the complex plan didn’t tell you that either (the i-phone isn’t really free – they just don’t tell you what it’s price is).

    I can’t read your mind, but you are certainly muddling something if you think a complex plan, with free this and that, is somehow transparent!


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