FCA to study cash savings as part of programme on competition across financial services markets
Regulators have today announced plans to carry out a market study to assess whether competition is in the interests of consumers. The Financial Conduct Authority (FCA) will focus on cash savings accounts, and how frequently the 80% of adults in the UK with such accounts switch between providers. The FCA comments:
The cash savings study will examine a range of issues including the effects of ‘teaser rates’ (the introductory interest rates offered to new customers) and how often consumers switch their savings accounts. Over 80% of all adults in the UK have some sort of cash savings account, so the FCA is keen to assess what it can do to ensure firms offer consumers the best returns possible and information that meets their needs.
The study will include a focus on introductory 'teaser rates' which are offered to new customers.
The FCA are keen to look at what action needs to be taken in areas that affect consumers:
We know that switching rates are low for financial services products and savings accounts are no exception. Even when people do switch their accounts, they are twice as likely to go with their existing provider than move to the offering of a competitor.
Philip Booth, writing for CityAM, highlights the misnomer of certain kinds of regulation:
Regulation is supposed to look after customers and, if that does not work, there is always a compensation payout… customers have no incentive to be discerning. Before we buy a car, we might consult What Car? or Honest John in the Telegraph. Before we spend £200 on a holiday, we might go to Trip Advisor and spend an hour or so browsing. Is there any chance of a Trip Advisor for financial services? Is it worth checking the reputation of an insurance company before we invest £2,000 a year with it? No. What would be the point? Why spend time checking other people’s experience of a bank, financial adviser or pension provider when the regulator will do the job for you and, if the company does not do as the regulator wishes, the customer will be compensated in any case?
Competition, in and of itself, cannot lead to 'bad' consumer choices.