Why An Open Internet is Good for Banking

The open nature of the Internet has led to innovation that is as boundless as imagination.  I dislike the idea of a ‘cable-ized’ Internet that has been washed, packaged and presented for ‘consumption’ – this is a bleak, bleak picture.

Here is a great example that shows the difference between a neutral network and one that’s been packaged and shaped based on carrier influence.  This infographic really demonstrates the distinction.

Here are the top reasons that I think that the banking industry should support an Open Internet:

  1. Efficiency. Consumers are increasingly consuming financial products through the internet — access to funds, access to trades, and marketing placement could all be manipulated by Internet Service Providers (ISPs).  Of course, for a fee the ISP could promote some banks packets over others but this is going to drive up industry costs.
  2. Innovation. Banks support the investment and growth of innovative firms.  An open internet supports innovation through the unbiased consumption of ideas and products — people vote with their clicks and innovative ideas are rewarded.
  3. Competition. If ISPs are manipulating packets  and directing traffic toward established firms this creates a protectionist barrier against new entrants.  This may sound great if you are an established firm but for the consumer and the economy in general this is inefficient and allows established firms to become inert.  Banks that want to expand into new markets or sectors may be limited by established ‘Net agreements.
  4. Proximity. Banks want to be as close to customers as possible.  Having another layer that skews and shifts customer behaviour decouples the customer behaviour from the bank experience.
  5. Regulation. If some form of traffic management is allowed then there would likely be increased oversight on the extent and limits of traffic shaping and promotion — this could likely result in increased regulatory reporting for carriers and a potential increase in regulatory reporting for those looking to pay for shaped traffic.  This is very detailed voluminous information, reporting on and managing this type of information would not be very fun for those involved.  Mandating a level playing field results in very simple rules:  either providers are manipulating traffic and are off side or they are not and are within the rules.

The FCC has recently passed controversial new rules to prevent telcos and cable providers from blocking internet access to Netflix.  That these rules are under appeal is clear evidence that for some firms neutrality is not in the plan.

Canada and the EU are currently reviewing neutrality legislation.

The biggest challenge in the topic as it has been presented thus far is that net neutrality reads as boring and technical — like a trade dispute over obscure widgets.  But tell people that they won’t get their Netflix movies next year or that if they search for their bank’s online platform and instead find a competitor and they may be concerned.

I think this is an issue to pay attention to because it will likely shape the direction of electronic banking and online customer interaction.

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