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Podcast S01E01

Auto-switching – the latest way for energy customers to save money

Auto-switching – the latest way for energy customers to save money

Jon Slowe speaks to Geraldine McBride, CEO of MyWave and Nigel Evans, Co-Founder of Flipper about auto-switching, the latest way for energy customers to save money on their bill.

Episode transcript

Episode 1: Auto-switching - the latest way for energy customers to save money

Jon Slowe, Director, Delta-ee

Charmaine Coutinho, Head of Consultancy, Delta-ee

Nigel Evans, Co-Founder, Flipper

Geraldine McBride, Founder, MyWave

 

Jon: Welcome to Talking New Energy, a podcast from Delta-ee, the new energy experts. We will be talking about how the energy transition is developing across Europe, with guests who are working at the leading edge of this transition.This week we're looking at the topic of auto-switching. Auto-switching is in many ways the ultimate in an efficient market – the ultimate consumer champion. From an energy retailer perspective. It can be quite terrifying – a potential race to the bottom and the loss of the customer relationship. We’ll be exploring how auto-switching is developing and where it's headed.I'm delighted to welcome three guests to this podcast: my colleague Charmaine Coutinho from Delta who's delved into the world of auto-switching across Europe and beyond; Nigel Evans, co-founder, chairman, and a shareholder in Flipper, one of the first auto-switchers in the UK; and Geraldine McBride of MyWave, a New Zealand-based company that's developing a digital personal assistant, which amongst other things can automatically switch you over to the cheapest energy tariff. So introducing my guests. Hello Charmaine and welcome. Would you like to give a quick background to who you are?

 

Charmaine: Yes. Sure. Thank you, Jon. So, my name is Charmaine Coutinho as John said, I work at Delta on our new energy business models research and I've worked in the energy sector for about twelve years in a product manufacturer but also in an energy supplier. So, I feel like I know the world of auto-switching very well, even though it's not that developed yet.

 

Jon: And Charmaine you previously been on the other side of the fence has an energy supplier negotiating with price comparison websites, haven’t you?

 

Charmaine: Yeah, that's right. It was it was an interesting experience. I'll just say it like that.

 

Jon: Thanks. And hello, Geraldine. Geraldine, you’re based on the other side of the world, so thanks for joining us from from New Zealand today. Tell me in a nutshell about MyWave and your experience with auto-switching.

 

Geraldine: Well, what we've done is we've developed artificial intelligence technology that helps make industries more efficient and how they deal with their customers. And one of the first time applications of that technology was in energy and this was a how do you go from knowing nothing about customer to matching them to the right energy plan and switching them and our technology can do that in less than six minutes and it's since then evolved to actually helping energy companies deal with their customers much better. So, we've evolved to go even beyond the auto-switching so it's been a fascinating journey we've been on the last few years.

 

Jon: So you can work on both sides of the fence, then. You can work for the customer switching them between energy suppliers, or you can work for energy suppliers helping them in their relationship with customers. If I understand right.

 

Geraldine: Exactly. And in in today's podcast, I'd be delighted to sort of let you know the types of ways in which energy companies are moving because the good news is that energy companies are moving and that there's some pretty exciting opportunities that we've discovered based on what we originally started with which was actually just helping match consumers and energy plans together.

 

Jon: And last but not least, hello Nigel. Nigel, likewise can you give us the elevator pitch about Flipper.

 

Nigel: Yeah, sure Jon. Flipper, we were set up in 2015 in the summer. It took us about 12 months to get fully up and running and taking customers on, but the vision that we had was essentially driven by our view that simple price comparison wasn't working effectively for customers. It was complicated, very few people had confidence that they really were getting good deals. They were getting locked into deals which perhaps they weren't comfortable with and we just felt why do it that way why not just understand what the customers’ requirements were, find the best deal in the market at the time and switch them and continue to switch them as better deals arose. And perhaps the big change that we had when we set up was we decided that rather than go the commission basis which all price comparison websites operate on particularly in in the UK, we would charge the customers a fee so that we could be seen to be genuinely independent of the suppliers.

 

Jon: Okay, very interesting. Well, it's going to be fascinating to learn Nigel about the journey you've been on and your experiences and what you've learnt and likewise Geraldine as well. Before we do that, let's take a bit of a step back and look at what auto-switching is and how it works, how widespread it is and what the different variants are. So, Charmaine maybe turning to you. From what you've looked at, what are the different forms of auto-switching or how to think about auto-switching, how to break it down a bit?

 

Jon: So I I think Nigel’s already touched on this a little… So the original customer need comes from this understanding in markets where price comparison of energy tariffs as not really being fit for purpose. So, people are probably familiar with the principle of comparing prices online for any product or service and in the UK for sure the price comparison initiative has been running since about the early 2000s. So, what that still does though is every time someone wants to switch their energy tariff, they still have to go back to the website, recompare and make sure they're getting the best deal and for customers it can be a hassle. It can be they don't know the right data for their energy consumption and these are kind of some of the key elements are auto-switching removes the hassle from. So very simply, a customer goes on an auto-switcher’s site, they would enter some details around their preferences, but also their energy usage and they would form a relationship with that auto-switching site. And on their behalf that auto-switching site would go to all of the market, check against the criteria for the best deal for the customer and switch them to it. But the critical thing is they continue to do that ongoing. So, the customer doesn't need to go back to a website. It doesn't need to re-enter its details. It really makes it very, very, very simple for the consumer and this is mostly residential consumers at this moment.

 

Jon: And Charmaine in a world where of smart meters of optical readers on analog meters of smart thermostats, then I imagine the need for customers to enter data in some markets will go down over time and there can be more and more automation.

 

Charmaine: Yes, we're in a very interesting stage particularly in Europe around the rollout of smart meters and smarter and for some markets where historically meters installed have not been automatic or you know Wi-Fi enabled but the principle is we're getting more data automatically and remotely about what customers use and cleverly using that adding into algorithms is actually really critical, critical part of auto-switchers. And there's two main models that we see one which again Nigel touched on… is there's a commission based model which is very, very similar to the price comparison site where a… every time a customer is switched to a different supplier that supplier pays a commission and that varies from five, fifteen, maybe twenty five pounds or Euros up to 50 or 60, so it really depends. But then the other model, which is the more like the Flipper model, is actually the customer pays so that gives a level of independence to the auto-switcher, which you don't necessarily get when you’ve got a supplier commission involved. So those are the kind of two key methods of revenue generation within this model. So that's really interesting because it's two very different models, but both the achieving the same goal.

 

Jon: People, Charmaine, often look to the GB market or the Great Britain market as the start of really intense competition in the retail electricity market. How widespread is auto-switching? It's not just a UK thing. Is it?

 

Charmaine: No, I mean the UK market is interesting because there's so many different suppliers. Although many of them are going out of business at the moment and this within that there's so many different tariffs. So, you have a real potential for confusion for consumers because there's so many choices and the one of the things that we found in our research that customers like is effectively auto-switching, which is curate that choice of them. It takes one thing away from them to do and so that's in the UK. But even in markets where there are is less suppliers, less tariffs, there's still a need for this. I think optimally where you have many tariffs, many suppliers, there's an obvious need. I still think this model can work because it takes away a core kind of pain point to the customer which is thinking about are they getting the best deal for their bill?

 

Jon: And I know from our research we’ve seen auto-switchers in Belgium and Germany. Interesting in Germany there's more of a shared savings model rather than a commission or fee model so lots of variants, but overall, I think it's still a relatively, new might be the wrong word, but the numbers are relatively small compared to the millions of customers that individual energy suppliers have.

 

Charmaine: I would definitely agree with that. I think we're probably looking at around maybe 200,000 users worldwide, but the rate of change in the UK in the last year has been quite astonishing and the rate of attention that this model has been getting so I think there's definitely kind of the seeds of growth.Jon: So Nigel, you've founded, co-founded, one of the first auto-switching companies. Tell us a bit more about Flipper. When did you start it? Where are you today? What's your journey been like?

 

Nigel: Sure, Jon. The company was set up in the summer of 2015 and the initial challenge was to just make sure that we have tech in place which was going to facilitate finding the best deal for a customer. That sounds relatively straightforward, but as Charmaine has already alluded there's a lot of suppliers with many different products and this becomes a non-trivial exercise. So, getting that technology in place was important and making sure that we had effective access to the customer data was also a challenge that we had to overcome. In other words, Flipper has never relied on the customer telling us what their consumption is. We've always gone straight into the customer’s bill records with their permission to make sure that we actually had their real historic data.

 

Jon: Was that a very deliberate move because you worried about that friction of asking customers to put data in and how hard was it to do that?

 

Nigel: It was a deliberate move. It was a combination of things: one) people just struggle with the concept of energy data. I mean most people don't know the difference between the kilowatt and a kilowatt hour for instance and indeed why should they. So there's a challenge of understanding but also there are you know significant errors can get introduced that way and if you try and use simple heuristics such as how many bedrooms do you have do you have children the family etc.? I'm not saying they're useless, on the contrary, but they don't really get to the level of granularity that you need if you really are comparing a very large number of offers. In terms of customers’ willingness to hand over the data, because that's really what we're asking them to do, certainly in the early period it was concern, and you know for good reason this is an unusual thing to do but I think people began slowly to understand that it's only with that data that we can find them the best deal and at least as importantly keep on switching them to the best deal as the market changes. And I think that that we have overcome that hurdle now. So, what we end up with is a situation where from the customers’ perspective it's very, very simple. Okay, behind it, of course, there's the IT which makes it less so but that's not the customer’s problem. That's our problem.

 

Jon: Hmm. And what would you say you've learnt over the few years that you've been going? You know how quickly have you been able to grow the business? Have you achieved your aspirations? What's been the toughest part of the journey?

 

Nigel: I think there have been a number of tough things actually. Firstly, given the model that we have which is not commission-based, the first challenge is to get people to part with money. And again, this isn't surprising – people don't typically when they're searching online for anything, they don't expect to have to pay money. An awful lot is available for nothing. So that's something that you really have to overcome that challenge particularly when you're a new company, which nobody's heard of. And that that was you know, let's be clear that was a that was a struggle that we had to overcome. The way that we overcame it was basically through some lucky breaks, some very, very good early PR that we had from very reputable sources in the UK, particularly the BBC and that did help us really breakthrough in the summer of 2016 and started getting significant numbers of customers signing up. What we then began to get were the customer reviews which progressively have improved and now they’re extraordinarily good. Trustpilot scores that the company is getting are 9, with very, very high levels of satisfaction. But that is something that we have to work on very carefully because things do go wrong and very frequently it’s because of problems at the supplier end, but because we're taking control customers don't want to hear about that, again quite rightly. We are taking on the problem, so every problem is ours.

 

Jon: That's quite interesting. So, because you're effectively taking over the customer relationship you're taking the pain of the mistakes of the challenges that suppliers have with their IT systems and their billing for example.

 

Nigel: That's exactly right and I think you know customers are increasingly thinking and saying who… people they will be asked who is your energy supplier and they'll say oh Flipper. Now, we're not an energy supplier, but they think of us as the people who are sorting out energy, so hence we’re their supplier and in many ways, we like the fact that they are looking to us to solve their problems and all of the pain at the back end. Some suppliers are excellent, some of them are very slow, some of themhave very, very difficult systems to work with and some of them, as Charmaine alluded to earlier, have gone out of business and that causes no end of concern to customers again quite reasonably.

 

Jon: Do you ever regret going down the paid route, the fee route, rather than the commission route? I mean I can see that the fee route means you are truly independent and on the customer side of the table, but does put up that that barrier to get the customer to join?

 

Nigel: Well, the reason I decided that we were going to go down the fee route was simply that in the long run I felt that a commission model wasn't sustainable simply because if you're going to a supplier and saying pay us some money 20, 30, 50 euros for each switch, but at the same time saying to the customer, if after two or three months, we find a better deal will switch you to it, then suppliers are increasingly going to say there is no way we are going to pay that acquisition cost if we're, if the relationship with the customer is very remote and ephemeral. So, I just felt that notwithstanding the if you like the moral stance, which I think Flipper has with regards to the way it's presented and the way that we charge customers, I think that it the commission- based approach in the long run is not sustainable.

 

Jon: Yeah, I can very much see that. So, playing the long game even if it means it's a bit harder to get those customers to sign up to begin with?

 

Nigel: Exactly so.

 

Jon: Geraldine, you've come at this from a completely different angle, I guess, or different perspective. Can you tell us a bit about your digital personal assistant and how you got into auto-switching from there?

 

Geraldine: Well, it's been an interesting journey, so first of all, we thought about this problem and think about the problem every customer or consumer in a home anywhere in the world. They all need electricity. They all need insurance. They need many, many home services. And in fact, all of them are really complicated to get because they hide behind their own complexity and most people are time poor. All they want to do is know that they're getting the right deal or the right the right savings. So, what we do is we built a technology it’s actually a platform which has a brain in it that gets to know the end consumer and all we need are data points. So once we know where a person lives and we know, you know sort of a little bit about how they're consuming energy whether that comes from a smart meter or from their energy bill, we take that data and we're able to then and their preferences and we're able to go out and scan the entire energy market through one of our energy partners and bring back the right prices and right plans which then the consumer can then elect to switch. Now we in our example, we went from knowing nothing about a consumer. We were a no-name brand to bringing on that consumer onto into our technology and some into my own as we call it My Intelligence Assistant and we were able to do all of that and less than six minutes including getting to the switch, which is i.e that they get, you know, they're going over to an energy company with a package of information that that is the switch. Now in terms of the practicalities there was a little bit of work behind the scenes liaising with those energy companies, but our energy partner which was an aggregator did that with us, but by and large the average consumer, you know age group was about 55. We had people as old as 95 years old using it and when we surveyed them like why did they use they said it’s that simple it's actually just so easy, it's so intuitive and also it remembers me and it will actually be able to continue to serve me, you know forever and ever. But what it’s done since then is evolved because energy companies now are starting to adopt this technology because they can see the power of essentially into what we call it is intelligent personalisation where you can build a relationship with your customer based around their data, give your customer a benefit based on their data, but also use it to make sure that people are on right plans. They're not just left to go back to the you know, the worst plan that’s available in the worst tariff and actually solve other challenges and I'd be delighted in this podcast today to share with you some of these new challenges that we're solving again because we've got a brain that centred on customers and customer data, so it's been fascinating journey and it's actually only just starting with because it's evolving into many different areas now with energy companies.

 

Jon: Okay, so your auto switching between energy companies and then even auto-switching within an energy supplier’s portfolio of different tariffs, for example.

 

Geraldine: Yes. So, for example, if I’m boarding if an energy company has three different types of energy companies within the group and you don't know how to you know, which one to choose what we can actually be helping, you know onboard people in a very simple and seamless way. And in fact, you know, the rates of conversion using our technology were way higher than even an app or a website so conversion rates were very good. But even now we're being used also to prevent existing customers having to go to call centres so if you can say to our technology I need a payment plan because I can't afford my energy bill this month our technology actually can manage the payment plan as it’ll remember what you did before? And say would you like the same energy per payment plan that you had last time we gave them 9 weeks to pay. Yes. Thanks. I'll take that same plan.We've got beneficiaries who are social welfare beneficiaries who are entitled to energy discounts. So what we're doing there is, under permission from the end-user we access the social welfare data, bring that into the into the energy data match the data sets and then we are able to then say, yes, you're entitled to an 18 percent energy discount and we can do all of that today. That was a 40-minute phone conversation on the call centre and we've turned this into a 30-second process. So energy companies are finding that we're helping to reduce the cost of to serve the customers and we’re deflecting between 30 and 50% off their call centres by using this technology. So where we started as being a switching we can do that matching pair right people to write plans. We're being used in so many more ways now and what we're doing it, we’re licensing our technology to the energy companies to enable them to do these intelligent things using the data that they have.

 

Jon: So you’re very much aggregating or bringing together data from different sources and using that to help companies, be it an energy company, be it your own auto-switching company to make the best decision for the customer. Okay. So Nigel, I'm interested from your perspective. You're building a consumer brand in the UK market. How much do you consider Flipper a consumer brand business or a technology business or you're a natural blend of both together?

 

Nigel: I think it's principally a consumer brand business at the back of it, of course, is technology but conceivably we would license some of our tech to others, although I must admit we haven't done that, but the customer is at the heart of what we do and when we think about what else we can offer how the market is changing and how we can interface with that both in energy and more broadly, it's always the customer who which we start with so, I think it's very much a consumer business and a customer facing business.

 

Jon: Nigel, do you think you're limited? Well, I can imagine the answer now your own or the main shareholder of Flipper is a water company. So it is how broad can you be energy or beyond energy?

 

Nigel: I think we could potentially be very broad with a whole range of Home Services potentially amenable to this type of approach. Some are more obvious than others. I mean things like mobile telephony broadband etcetera would be relatively straightforward to look at in the same way. But I also think that there's a huge amount of opportunity still in energy, which we’re only just beginning to scratch the surface of and Geraldine has alluded to some of the changes already, but the combination of things like a far greater penetration of smart meters the potential move to half-hourly settlement for residential customers in the UK market, where every half hour the price potentially could change and the facilitation of two-way interaction with customers in other words, they're not necessarily just demanding and consuming energy, but they potentially, with storage devices or with interruptability of existing devices, offering support to the market generally or the network.All of that opens a whole range of complication, but real opportunity as well. So, in the UK, we've got now about 60 to 70 suppliers all with a range of tariffs – that's complicated. If you say additionally that you've got half hourly pricing in that market and you've got two-way interaction then it's impossible for anybody to try and do this without automated systems. So, it's either going to be reliant on a supplier or on an intermediary such as Flipper which always by its nature. Is there looking after your interests rather than trying to exploit your loyalty and hope that you won't realise the prices have risen. So, I think that it's adding the richness and the value beyond price saving which is where much of the future benefit and growth could come from.

 

Jon: That's really interesting because some people might look at auto-switchers and think well that only really works when you've got a commoditised market of kilowatt-hours coming from the grid and you can compare one identical kilowatt hour with another identical kilowatt hour. But I think we see a future where yes that will be part of the market. But another part will be people charging their electric vehicle, time of use tariffs, as you say half-hourly settlement, and companies that can help the consumer get the best deal and that market or help them with smart charging for example could be really interesting.

 

Nigel: I think that's right Jon and you know, we may move away from a model in which you're switching the customer from supplier a to supplier b after three or six months or something to one in which you're thinking all the time in real time. What is the best thing for you to do now from whom with whom so you may have somebody who for part of their demand during some days is dependent on a particular supplier. And at another time may be dependent on a completely different supplier. And with things like as you say electric vehicles the demand curve and the demand shape will be profoundly changed just by, you know, an individual consumer the you go out to get your electric vehicle and suddenly you look different. So, the opportunities are potentially huge. At present people by electric vehicles are often paying exorbitantly high prices for the power.

 

Jon: Charmaine, I guess another example of this could be the fact that in you could have two suppliers to one household for different loads with in that house.

 

Charmaine: Yeah. It's a really fascinating potential opportunity because customers’ needs are going to be much more complex. So Jon I think you're referring to some of the changes that the UK market is looking at where you will have one meter but the idea is that you can have more than one supplier and that would change dynamically over time. So, it may well be that for this particular point in time, your electricity supplier should be somebody's got really highly specialised and appropriate electric vehicle tariff for example, but then three hours later it might be someone who's got a very targeted heat pump tariff or someone that offers you a very good export rate to the grid and given that you can do multiple suppliers on one point it opens up well two things way greater customer choice, but also a huge amount of innovation in the energy sector and it kind of comes back to one of the points that Geraldine doing was making around data and actually what does the customer really, really want or need at this particular point in time and that changes it's not as simple as the kilowatt hour over the course of the day.

 

Jon: Okay finish off with a question to it to everyone so… auto-switching. A huge threat for incumbent energy suppliers or actually the technology behind this a huge opportunity for them to optimise what they offer to the customer? Geraldine, and we’ll need to keep it fairly short but, Geraldine, did you want to go first on that?

 

Geraldine: Well, I think that it is a huge opportunity and I think what Charmaine just said and this is why data is everything and you will not be able to unlock the next generation of energy innovation with electric vehicles and all of the things we've been talking about including being centred on the customer without having AI and a data driven model and that's exactly why we built the technology we've got and why are we experiencing such a strong uptake by energy companies because you know, that's exactly the channels that we were born to solve. So, we're right in the middle of this shift particularly in the New Zealand and Australian markets and also in Britain, so it's a very exciting time I think to be an energy.

 

Jon: Okay Nigel – threat for an energy, energy companies or opportunity for them to use this kind of technology themselves?

 

Nigel: Well, I'm very much in the Geraldine camp here. It's the opportunities are enormous and indeed the energy suppliers need this type of technology and these type of intermediaries to enable them effectively to access the market but there is a little anecdote. I like to share… six to nine months ago a number of energy suppliers in the UK acted together to frustrate Flipper by not allowing Flipper customers to take supply so they obviously thought it was a huge challenge and they decided that Flipper customers were not acceptable. Fortunately, the regulator disagreed extremely strongly with that and told them that they actually had to, so that's encouraging that the regulator made a good decision. But I think also from the suppliers’ point of view they were slightly missing the point that effectively they can use companies like Flipper themselves to offer maybe very short-term products into the market which you know, we could offer something great for a week. Hmm something like that. There are huge opportunities for them.

 

Jon: Okay, really interesting. And Charmaine final thought from you in terms of threat for energy suppliers. Will this put them out of business or actually an opportunity of that's the technology.

 

Charmaine: Well, I think I need to be a bit more dampen down everyone's enthusiasm just to show the other side of the fence. I think there's a there's a really interesting opportunity for both sides. I think one of the key challenges for auto-switchers in whatever format they may evolve to is that getting in front of the customer and challenging those years and years of brand recognition from energy suppliers full stop and then including big ones and small ones. So, you know, just getting the customer line-of-sight to their product offering is, it's a key one. I think the other piece is really kind of the boring bit about starting a new business, which is just getting all the processes, all of the, you know, perhaps in this case of algorithms machine learning. All the data piece just working really quickly and its people often reflects that in quite a kind of light touch way, but it's complicated and I think that refinement is what we'll see going on next kind of 12 to 18 months. But yeah, I think it's an opportunity for everyone really think with all these things in you and you've got to think of it differently about the whole system.

 

Jon: Okay, well, I hope you've enjoyed listening to the podcast. I think it's been fascinating to hear from two companies that are coming at the same problem and from slightly different backgrounds, but with many similarities. For energy companies is not all doom and gloom by any means. Theywon't be auto-switched out of the market, but there are some big opportunities and challenges to embrace this technology to thrive in a more complex energy world and the future. S Nigel and Geraldine, thank you so much for sharing your thoughts and experiences. Good luck to both of you with your businesses going forward. Charmaine, thank you very much to you. And to the listeners, thank you very much for listening and look forward to you joining me for the next podcast. Thank you very much and goodbye.

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