Bank customers want a fair share of the pie, says research

 

Major research into consumer attitudes has concluded that the very thing customers want most is the very thing Britain’s banks do worst.

According to an extensive study conducted over the course of several years, most people do not think they get a fair deal from financial institutions.

The finding emerges from data collected for the influential Financial Services Research Forum at Nottingham University Business School.

Professor James Devlin, the Forum’s Director, said: “The general feeling among consumers is one of ‘They’re getting more out of this than I am’.

“People want what we might call a fair share of the pie when it comes to their dealings with banks and other financial services providers.

“That means the benefits of the relationship are generally equally split and consumers get good service and reasonable terms and conditions.

“Unfortunately, that’s not the average customer’s perception. Instead it’s much more a case of ‘They get more from me than I get from them’.”

Fairness Index

The Forum has been compiling its Fairness Index, which is the only independent benchmark of its kind in the UK, since 2009.

The data is taken from the responses of thousands of consumers who participate in online surveys, usually carried out biannually.

Institutions are divided into banks, building societies, general insurers, life insurers, investment firms, financial advisers and credit card companies.

They receive index scores out of 100 – below 50 indicating perceptions of unfairness, above 50 reflecting increasing fairness and 50 neutral.

Overall, the lowest-ever measure of fairness, with an index score of 44.06, came in late 2009, when the financial crisis was still at its height.

The figure rose to a high of 47.56 in early 2010, fell to 45.33 in early 2011 and has recovered to 47.30 in the latest round of data collection.

Distributive fairness

Meanwhile, in the case of “distributive fairness” – the “share of the pie” scenario – the index score has only once risen above 43.

It stood at 41.35 in early 2009, slid to a low of 40.37 in late 2010, rebounded to a high of 43.03 late last year and now stands at 42.55.

Professor Devlin, a Professor of Financial Decision Making, said: “We’ve now collected seven waves of data over the course of more than two years.

“That puts us in a strong position to comment on the relative importance various sub-dimensions of fairness have in consumers’ overall perceptions.

“It’s immediately clear that by far the most significant is distributive fairness, whose scores are five to 10 points lower than other considerations.

“Financial institutions should be concerned that they perform so poorly in what is by far the biggest influence on how they’re regarded as a whole.”

Other areas that consumers consider notably important include courtesy and communication and the explanation of products and services.

Professor Devlin added: “In theory, showing customers more courtesy, consideration and respect should prove quite straightforward.

“But ensuring consumers perceive products are explained clearly and that they understand what they’re buying will prove more challenging.

“It’s likely to be especially difficult in light of the well-documented problems of product complexity and consumer understanding in the sector.”

Financial Services Research Forum

The Forum is unique in bringing together all stakeholder groups for the purpose of informing policymakers in the public, private and voluntary sectors.

It is widely acknowledged as the UK’s most inclusive body for advancing the understanding of financial behaviour and promoting consumer interests.

http://www.nottingham.ac.uk/business/forum/index.aspx

An article about this research was published in FT Adviser on June 18th, 2012.