The FCA has responded to the European Commission’s Green Paper on Retail Financial Services.  The Green Paper focuses on increasing transparency and choice for consumers in the retail financial services sector and discusses the growth in digitalisation that the sector is experiencing.  The FCA’s response supports the Green Paper and endorses an approach which takes steps to benefit consumers.

The FCA’s response recognises that some of the issues raised in the Green Paper have already been addressed through various EU measures.  Other issues identified include:

  • current defects in the disclosure process which adversely affects consumer understanding of products available in the retail finance services market.
  • consumer uncertainty surrounding the applicability of rules across the EU which detrimentally affects consumer confidence.
  • the possible risks to consumers that reducing barriers to trade may have.
  • the lack of familiarity consumers in one member state have of products and services available in other member states.

The Green Paper also raised specific issues and the FCA’s response addresses these in detail.  For instance, the Green Paper highlights the need for better products, enhanced choice and greater opportunities for both businesses and consumers.  The FCA’s response states that UK consumers lack trust and confidence in buying cross border products and services and need safeguards in place to protect them, hence collaborative, cross-national research would be useful and could help stimulate competition between firms.  There also needs to be more effort to help consumers buy financial products across borders.  Whilst the European Commission has already taken action in relation to standardised disclosure for products which should support comparability, the FCA’s response states that any future action should be targeted around ‘smarter disclosure’, which would support disclosure measures being developed in accordance with a genuine understanding of consumer behaviour.  In addition, consumers need to understand their rights of redress to ensure that they feel confident and are able to make informed decisions.

Finally, the FCA’s response identifies future priorities for action.  These include further research into consumer diversity and behaviour, a strategy to address large price differences, a review of existing disclosure requirements and opt-in regimes and improving consumer awareness of charges for transactions in foreign currency.