Tuesday, 12 May 2009

Innovation in Personal Financial Management: Culture or just numbers

I was recently bemoaning how far behind the USA the UK lags in personal financial management ("PFM") web-sites (see for example @mikelinskey's write up of Finnovate Start-up 2009, as well as in search of perfect PFM at Finovate).

Why is that Americans are so much more innovative?   Is it a cultural issue?   Surely that must be a factor - after all, America was seeded with those Europeans who had the gumption to up sticks and move there in the first place.

However it also strikes me that the USA is simply a much larger market (United Kingdom: Pop 61m, United States: Pop 306m).

So any mass retail online product such as PFM in the USA has an 5 times larger target market than the same in the UK - a 5 times larger prize to play for.   And financial services are a product that does not travel well, so your target market is stypically fairly limited to your national market.   Its not just the currency (although all those $ signs are usually the first clue that a product is used-based, as the US-based web-sites are surprisingly silent about the fact that they are US-targeted), the tax and product rules are also very country specific.

Where does that leave UK competitors?   Clearly the economics are, at least in this respect, less favourable towards innovation.

One solution is simply to copy and adapt solutions from the US.   The UK certianly has a track record of doing that.

On a policy level, it also demonstrates the value in belonging to a larger currency, tax and product regulatory unit.   The EU seems ready made for that purpose, certainly on the currency front, although there is a long way to go yet on the tax and regulatory front.