Flock mentality challenging financial services

UK financial services are changing beyond recognition, with the balance of power tilting towards the consumer, according to the head of a price comparison service.

Paul Pester, newly appointed chief executive of Moneyfacts.co.uk, told delegates at the site's annual conference that it was worrying that some financial services firms seemed to treat recent consumer revolts against charges and mis-selling as a "PR issue" that would blow over.

"We've moved from a world in which the consumer was a minnow, nipping at the fins of a big predatory fish, to where the minnow is replaced by a flock or herd or swarm that's wielding immense pressure," said Pester.

His speech comes amid consumer revolts on current account and credit card charges, which are costing the industry billions, and signs that a new mis-selling scandal is emerging on debt insurance.

The Office of Fair Trading (OFT) is currently investigating banks' pricing structures in a wide-reaching study that is due to be published by the end of the year.

Thousands of borrowers are also poised to challenge lenders over payment protection insurance – designed to cover the repayment of debt if people fall ill or lose their jobs, which has long been criticised as aggressively sold, expensive and inadequate.

Pester said consumers' relationships with institutions such as the church, state or family had led to a change in the way people interact with banks and building societies.

He pointed to the decline in popularity of religion, growing apathy towards the state – with almost twice the number of votes cast in the recent series of the Pop Idol reality television show than in the European elections – and changes to the typical family, with more single mothers raising children now than in the past.

He said there was also no longer a "paternalistic" relationship between banks and consumers, exemplified by the traditional "City gent" bank manager and the customer who had to seek his personal approval for a loan.

Pester said new means of communication – such as mobile telephones and the Internet, including social networking Web sites such as Facebook and Bebo – had enabled consumers to join forces easily and quickly.

The OFT has already forced providers to cut credit card default charges to 12 pounds or less, and Pester said that had acted as the catalyst for the flock mentality.

"Flocks of consumers are forming and starting to circle the banks," he said.

"They are symptoms of a changing world where consumers have much more power and much more influence."

Pester, who joined Moneyfacts six weeks ago, was chief executive of Virgin's financial services business for five years, then assumed the role of managing director of Lloyds TSB's consumer banking arm.

- Reuters