Drivers of Perceptions of Fairness in Financial Services in Australia

Abstract

Fair treatment of consumers by providers in financial services markets has been highlighted as a key issue in promoting greater consumer engagement with financial services (FSA 2008a; FSA 2008b). In developed market economies, consumers’ interactions with financial services markets are often characterised as problematic (Llewellyn, 1999; HM Treasury UK, 2002), with resultant outcomes that may be detrimental to individual consumers and society as a whole. Such outcomes include the under-consumption of some types of financial services, such as pensions and long-term savings (and the over-consumption of others, such as personal debt) can have profound implications for the welfare of individuals and society as a whole (Bridges and Disney, 2004: Khoman and Weale 2006; Stone and Maury, 2006; Devlin, 2010). Thus, level and nature of consumer engagement with financial services is very much a social marketing concern. Markets for retail financial services have been characterized as high in information asymmetries (Llewellyn, 1999), with consumers generally having limited understanding of financial services. As a result, consumers are generally characterized as vulnerable and liable to make decisions which are detrimental to their interests, or alternatively avoid making decisions at all and dis-engage from the marketplace (Noble and Knights 2003). In addition, as consumers have limited understanding, then it is important that they perceive that they are being treated fairly and have a high degree of trust in who they are dealing with, in order to encourage engagement. A comprehensive review of the retail savings and investment sector in one developed country (HM Treasury UK, 2002) highlighted a high degree of product complexity and opacity in financial services markets, which exacerbates the problems faced by consumers. In the light of limited understanding and the opacity apparent in financial services markets, it is hardly surprising that one main implication is limited engagement on the part of many.