Improved consumer protection top driver of trust in financial services

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Improved consumer protection top driver of trust in financial services
Caroline Rainbird, chief executive at the Financial Services Compensation Scheme (Carmen Reichman/FTAdviser)

Only a quarter of consumers trust the UK financial services industry to act in the best interests of clients, while 31 per cent distrust the industry, according to research by the Financial Services Compensation Scheme.

The survey, conducted with more than 2,000 adults in the UK, explored the importance of a trusted compensation scheme in raising consumer confidence in the UK financial services industry.  

It found that 42 per cent of consumers are concerned about a lack of protection if things go wrong, while 40 per cent are concerned about firms going out of business. 

These were the third and fourth top concerns regarding the industry, behind fear of scams/ fraud and handling of personal data. 

However, after being shown a definition of the FSCS, 68 per cent agreed that FSCS protects consumers.

Source: FSCS, November 2022

The research highlighted that awareness of the FSCS, and the protections that the scheme provides, helps to boost consumer confidence in the industry for almost two thirds of those surveyed (63 per cent), with more than half (55 per cent) agreeing that the scheme contributes to financial stability. 

A similar number (63 per cent) expressed they are more likely to save, invest or spend more of their money when firms are FSCS protected, while 59 per cent are more likely to recommend FSCS protected products and providers.  

The FSCS said these findings indicate that a clear opportunity exists to leverage the role that it plays in supporting investment into the UK and contributing to economic growth.

Source: FSCS, November 2022

Caroline Rainbird, chief executive at the FSCS, said: “Today’s consumers are dealing with challenging financial realities. Rising costs and a squeeze on real incomes mean many are facing financial uncertainty well into their future. 

“Innovations in technology across the sector are creating opportunities for growth, but also greater complexity for consumers.  

“In addition, recent unrest in the global banking sector is likely to have tested consumer trust and confidence in the industry, highlighting the importance of a trusted deposit protection scheme that is fit-for-purpose for both eligible individuals and small businesses.”

Rainbird said against this backdrop it has never been more important for the public to have trust in the financial services industry and confidence that their money is safe.  

“Understanding of FSCS’s role in promoting trust and confidence is key to helping consumers to feel more confident when making decisions about their finances and can contribute to greater financial stability,” she added.