We have spent the first weeks of the New Year undertaking a stocktake of the critical policy issues in financial services to help us plan our work and target our campaigning activities.
Below we summarise what we think are the major issues facing consumer groups, policymakers, regulators and, of course, households. There is a dedicated page with links to ‘mini-essays’ explaining why we think these are major concerns – please see the main page Financial services priorities – 2015 and beyond for more detailed explanations.
We would welcome any feedback and are keen to hear from organisations who are interested in exploring ways of working together to tackle these major problems. We are also keen to hear from potential sponsors who might be interested in funding further work on these issues.
It is only fair to acknowledge that progress has been made in ‘retail’ financial services – particularly in terms of cultural and behavioural change in some areas and amongst certain individual financial institutions. But, of course, there is much still to be done and new risks continually emerge. Progress has been very slow on some issues so a renewed effort is needed in 2015. There are a number of issues where the problems are so daunting that these cannot be fixed in one year – but work needs to begin to prevent any further deterioration in consumer detriment. There are also a number of issues on which we need to maintain constant vigilance and be alert to potential crises or risks and events that threaten to reverse progress already made.
The major categories are: consumer issues; major public policy issues; wholesale and institutional market issues; external threats to financial inclusion; and consumer policy theory.
There is a wide range of specific consumer issues which we could choose from given the sheer size of our financial services industry and the number of customers (existing and potential). But the issues we think merit the most attention in the near-medium term are as follows:
- Protecting consumers from the fall-out from the pensions free-for-all
- Access to fair and affordable credit
- Building financial resilience and long term financial security
- Access to banking
- Cybercrime and financial fraud
- Socially useful financial innovation – research and development
For more detail on these issues please see: Consumer issues
Major public policy issues
In addition to the specific consumer issues highlighted above, we have identified a number of major public policy issues which require a much greater degree of analysis and coordinated interventions from the state, regulators, civil society, and the financial services industry. These are:
- Access to affordable, good quality housing
- Income and pension security in an age of economic uncertainty
- Funding long term care
- Income in retirement – asset decumulation
For more detail on these issues please see:major public policy issues
Institutional financial market issues
Most of our work relates to retail financial services and financial exclusion. But our own research suggests that the cost to society of market failure in the hugely important wholesale and institutional financial markets that make up the wider financial system is much greater than the cost of failure in retail financial services. Moreover, this market failure is transmitted through the supply chain to affect households and the real economy. Reforming wholesale and institutional financial markets so they work better for society should be a priority. However, civil society groups have largely been absent from the big debates on the role and efficiency of these markets. So we have included three issues which we think civil society organisations could influence in the near terms. The three core issues are:
- Value destruction in the asset management/ pension fund industry
- Inefficient financial intermediation/ resource allocation and the real economy
- Financial networks and system resilience
For more detail on these issues please see: institutional financial market issues
In terms of our wider priorities, we will return to the wholesale and institutional markets at a later date.
External threats to financial inclusion
Rather than levels of financial inclusion and provision improving in the UK, we have very real fears that a confluence of major socio-economic, demographic, commercial and financial market and technological forces and trends will exacerbate problems and make it more difficult for vulnerable households to meet their core financial needs. Before we develop appropriate responses, we need to understand these forces and trends and what’s at stake. The key issues are:
- The role of ‘Big data’ and potential abuse of financial information
- The impact of the new economic and financial reality on financial services business models
- Legacy business models and transition risks
For more detail on these issues please see: external threats to financial inclusion
Rethinking consumer policy theory
In addition to dealing with specific policy issues such as financial exclusion, housing and long term care we think there is a real need to change the way we understand market failure and develop financial services policy – this may not seem an obvious problem but unless we change the way we develop theories to explain why markets fail and make policy we are condemned to repeat the mistakes of the past. To help us do this, we think there are three key issues to be confronted:
- Is rolling back the state a false economy – accounting for private sector replacement of public services
- The need for a new consensus between the state, civil society and financial sector to tackle chronic financial exclusion and underprovision
- Rethinking competition policy and financial innovation
For more detail on these issues please see: consumer policy theory