• Report challenges industry to use ‘best buy tables’ to champion consumers
• Link pay to customer service targets and cut bonuses for those who fail
• Tougher penalties for banks who break rules and mistreat consumers
Consumer bodies should produce quality-based best buy tables for financial institutions, ranking their products on how well they work for customers, according to the think-tank Demos.
The plan is one of a number of ideas proposed by a timely new report calling on banks and other institutions to be judged on their customer service record, forcing them to better respond to their customers’ needs.
The research is published by Demos Finance, the financial research unit at the think tank Demos, and comes at a crunch time for the big five high street banks.
The National Audit Office, the Government’s spending watchdog, is expected to soon publish an investigation into the new regulatory regime for banks and other financial institutions.
Labour leader Ed Miliband said in a recent speech calling for banking reform: “Under a Labour government, you will no longer be serving the banks. Instead, the banks will be serving you.”
He followed up with a TV interview saying he would involve consumer groups in ensuring there is genuine competition between businesses, adding that Labour “aimed to be the party of the consumer”.
The Demos report Putting Customers First recommends:
• New best buy tables that combine quality measures of customer satisfaction along with price of financial products such as savings accounts, loans and mortgages.
• Faster progress in moving away from using sales targets for financial incentives, and instead tying rewards for front-line staff to consumer satisfaction and making sure that bonuses for those at the top are also clearly linked to how well customer needs are met.
• Supporting the Financial Conduct Authority in using its powers to enforce swift and uncompromising punishment for misconduct, including greater use of criminal and civil sanctions against individuals.
• Regulators cut back their focus on low-risk financial products, enabling banks and others to pass any savings onto customers, while ensuring high-risk products such as pensions remain under scrutiny.
• Better support for consumers who find it hard to understand financial products and publicity campaigns to explain the risks and consequences of certain types of transactions, including getting into debt.
Director of Demos Finance, Andrew Freeman, who authored the report said:
“When it comes to price comparison websites customers are spoiled for choice, but very little separates high street banks on price. It is easy for them to keep a close eye on what their rivals are doing, and quickly match any offers.
“What we should be doing is judging banks and other financial institutions on how they treat their customers. Best-buy tables, from a central and independent source that people can trust, would empower consumers when choosing who should look after their money, and force banks to put their customers’ needs first.
"Rewarding bank bosses for good customer services could force them to think harder about offering innovative and helpful financial products beyond the current spectrum of deals. Encouraging banks to do this would be a huge boost for competition in the sector.”
NOTES TO EDITORS
The report, Putting Customers First, authored by Andrew Freeman and Hilary Cooper, is published by Demos on Thursday 30 January 2014.
This report focuses on the regulation of the retail finance market and the conduct of financial institutions when providing consumers with financial products and services, as overseen by the Financial Conduct Authority (FCA). (This is separate from the regulation of systemic risk, which is the role of the Prudential Regulation Authority and is outside the scope of this study).
The FCA formally began operations in April 2013. Two months later the Parliamentary Commission on Banking Standards published a highly critical report on standards and culture within the sector, with many of the Banking Commissioners’ recommendations being incorporated into the Financial Services (Banking Reform) Act passed in December 2013.
This research was supported by Lloyds Banking Group.
For further interview or comment with author or to discuss the possibility of case studies please contact Rob Macpherson.