This article is supplied by KPMG
Lawrence Sutton, senior manager, EMX solutions at KPMG, says yes:
Flexible benefits technology has evolved significantly in just 20 years. When it first arrived on the scene, it was a luxury for even large, wealthy organisations. Today, flex technology is ubiquitous, even in small and medium-sized businesses. In the future, I believe it will be free.
Of course, many flex benefits solutions are already free in a sense, where they are sold off the back off other products or services, for example. However, in the light of the Retail Distribution Review’s rules about transparency around costing, fee-based technology is now more prevalent.
The technology trend of reducing costs (to free) is too strong, however. We have already seen it happen with the emergence of free apps, free social media sites and webhosting.
Many of the costs associated with implementing flex technology relate to bespoke or inefficient implementations. Repetition of implementations enables providers to find new ways to create a better service.
Also, we are now seeing flex providers working with employers’ other technology providers. Years ago, this would be controversial; today it is seen as removing silos and cutting costs.
As this working relationship strengthens further, we will see the market consolidating, with providers joining up to become one of a small number of key players providing a free service to the whole market. They will be able to do this by selling broader propositions, as at present, or by an online advertising revenue model.
Not everyone will be comfortable with going down the advertising route. But the concept of providers paying to be on the technology (rather than the consumer paying) in order to gain or maintain a competitive advantage is a real possibility.
Look at the headway the industry is already making, in terms of product innovation, logistical efficiencies and by significantly reducing costs. If these things can all be provided free, who would pay for them?
Kelly Gajjar, manager, EMX solutions at KPMG, says no:
Market-leading flexible benefits technology will never be free. While technology is becoming more competitive compared with 10 years ago, in our ever-changing market there will always be a demand for bespoke and innovative flex builds. Employers are willing to invest in this area.
Since the Retail Distribution Review, fee-based revenue models dominate. Some providers may opt to adapt a fee-free solution by offering an off-the-shelf standardised tool, but I believe these providers will lose their competitive edge.
As we are repeatedly told in this life, you get what you pay for and flex technology is no exception. A free solution will come at the expense of a truly intuitive, tailored and customisable service.
I am also sceptical about a cost-free solution’s ability to appeal to prestigious employers that pride themselves in their unique benefits offerings, administered and communicated through an engaging online platform.
Some may argue that we can always improve efficiency and reduce prices, but someone will still have to foot the bill for implementation costs, compliance, governance and security.
Providers may be seduced by the success of Facebook and its advertising-based business model, but I would question whether the practices that facilitate this would be compatible with the principled practices of impartiality and independence.
There is no doubt that the market will become more competitive as providers find new ways to improve their solutions, but it will not be by giving away free technology. It will be through innovation, customisation and rapid reaction to industry changes: all things that customers expect to pay a premium for.