There are a number of barriers to access which can undermine consumers’ willingness to engage with financial services and/ or affect capacity and ability to make effective, informed choices and decisions.
These barriers include:
- low levels of consumer awareness of the need to plan and provide for the future, or shop around for better deals;
- low levels of financial literacy and capability;
- consumer trust and confidence;
- inertia and behaviour, and impact of external factors such as the property market.
The net result of these barriers is that consumers can ‘self-exclude’ to a large degree. This can be detrimental to consumers’ own welfare but this has a double whammy effect as consumers have to be persuaded to save or invest through expensive advertising or incentives, or need the support of expensive advice and guidance – this has the effect of pushing up distribution and access costs which in turn makes it unprofitable for industry to serve larger numbers of less profitable consumers.
Not surprisingly the government, regulators, charities and industry are expending huge resources on improving consumers’ financial capability. If interventions are to be effective then they need to change consumer behaviour, and help them participate effectively in the market. It is interesting that given the size of the resources we actually know very little in the UK about which interventions are effective at changing behaviour.
The only true measure of the success of financial capability interventions is whether are to be effective. Therefore, our strand of work in this area focuses on undertaking innovative research that provides real insight into how consumers behave in financial markets and identifying the interventions that are actually effective at promoting positive consumer behaviours.