New research from FSCS shows a trusted compensation scheme boosts consumer confidence in the UK financial services industry and contributes to financial stability.
The Financial Services Compensation Scheme (FSCS) published new research, conducted with more than 2,000 adults in the UK, exploring the importance of a trusted compensation scheme in raising consumer trust and confidence in the UK financial services industry. The research highlights that awareness of FSCS, and the protections that the scheme provides, helps to boost consumer confidence in the industry for almost two-thirds of those surveyed (63%), with more than half (55%) agreeing that the scheme contributes to financial stability.
A similar number (63%) expressed that they are more likely to save, invest or spend more of their money when firms are FSCS protected, while 59% are more likely to recommend FSCS-protected products and providers. These findings indicate that a clear opportunity exists to leverage the role that FSCS plays in supporting investment into the UK and contributing to economic growth.
With the research highlighting ‘improved consumer protection’ as the top driver of trust, it’s vital that all stakeholders in the industry work together to further increase awareness and deepen understanding of FSCS and the protection it provides. While much has already been done on this, helping to improve trust and confidence in the industry, it is well-documented that low levels of trust in the sector continue to exist. The new research from FSCS adds further evidence, revealing only a quarter (25%) of consumers trust the industry to act in the best interests of its customers, with only utilities, a sector facing high consumer scrutiny due to price hikes and record profits, faring worse than financial services.
Since the research was conducted in November 2022, consumer trust and confidence in the industry is likely to have been impacted further by recent global events in the banking sector. The collapse of Silicon Valley Bank (SVB), earlier this year, followed swiftly by a second high profile failure in the form of Credit Suisse, provides a powerful reminder of how easily trust in the industry, and the confidence that goes with it, can be lost.
Caroline Rainbird, Chief Executive at 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.
“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.
To effectively tackle the economic challenges and embrace the opportunities ahead, all stakeholders must work together to improve trust and confidence in the industry. We hope this research contributes to the discussion and helps inform all partners about the role that FSCS plays in supporting the industry to thrive.”
