Abstract
If the UK retail financial services sector is to seize the opportunities which will emerge in the future, it will be necessary to restore consumer confidence in the market. This paper argues that this will only be achieved through a radical transformation in the nature of regulatory compliance. The roots of the current consumer crisis of confidence are exposed by retracing the recent history of the sector; particular consideration is given to how the sector has responded to the changing political, economic and regulatory conditions of the post‐War era. It is possible to characterise the sector prior to the 1980s as somewhat anti‐competitive and lacking in innovation. Changes during the 1980s led to highly favourable business conditions, without stringent regulation, making it easy and profitable for the sector to continue to be short term in outlook without considering the longer‐term consequences for consumer confidence. Not surprisingly, the drive for short‐term profits led to the exploitation of many consumers and the subsequent scandals have reduced general confidence in the sector and also resulted in a regulatory backlash. Demographic changes and an emerging political consensus on a reduction in state welfare provision mean that the future business environmnent is potentially very promising. However, if the sector and its constituent organisations do not evolve to regain the trust of consumers and satisfy the demands of their regulators they will face severe competition from outside competitors and an even more hostile regulatory environment. Many of the organisations in the sector will need a complete overhaul in their attitudes to compliance if they are to succeed. Current approaches to developing internal compliance cultures may not be enough but emerging technology may soon provide a revolutionary new approach.
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