Customers have “become complicit” in allowing financial services to take advantage of them, the federal Treasurer has said, calling on consumers to accept responsibility.
Speaking to mark the release of the Productivity Commission’s final report into competition in the financial services industry, Treasurer Scott Morrison said stronger regulation hasn’t helped customers grow stronger and has in fact infantilised them while also suffocating competition.
“You can't take yourself out of the game and listen to those who want to infantilise you by promising a cotton wool regulatory system, with nanny-like regulators, that rather than awakening and empowering your consumer power, will rock you off to sleep,” he said.
“Beware those promising to protect you. Not only do they usually fail, not only do they cruelly and falsely raise your hopes with vain promises of being shielded or being compensated only to disappoint you.”
Mr Morrison said customers of financial services need to “stop being passengers” but acknowledged that having access to data is a critical step in this.
That’s the problem.
While calling on customers to shake off the “dulling effect” of regulation, he noted that customers actually aren’t in a position to be able to make the right decisions, due to a lack of information.
“They aren't in possession of the detail that accurately shows what kind of deal or discount they are receiving, and are therefore unable to compare precisely with other products in the market or what other customers in their circumstances are getting,” Mr Morrison said.
The report said customers face a “blizzard of barely differentiated products”, rather than real competition, and that many highly profitable financial institutions have gained these profits through “persistently opaque pricing”, “conflicted advice” and a lack of accessible information, leading customers to stay loyal to inappropriate products.
Mr Morrison also noted there is “no genuine transparency around product and pricing”, and that the industry has created these hurdles.
Nevertheless, the Treasurer posed this question: “You also must question whether customers are really seeking it [information] out. Or are they just expecting it to rock up at their door. ‘It’s someone else’s job to ensure that I know all these things’.”
As the financial system lives and dies on customer understanding and action, he said the government is counting on personal responsibility.
“That said, after having enlisted you in your own interest, as the government it’s our job to ensure you can get access to all the things you need to make the right decisions for you,” Mr Morrison said.
The Treasurer said change within the sector has arrived and will continue to develop as Open Banking is rolled out next year.
“The disruptive forces of technology, the arrival of nimble new players, the evolution of data use, and the empowerment of the customer are combining to upend traditional banking products, services and transactions the world over,” he said.
Mr Morrison said the government hasn’t been “waiting or delaying our action” to deliver change within the banking and financial sector and that the government will consider the report’s recommendations in conjunction with the royal commission’s findings.