A new report out of the Financial Markets Authority (FMA) has found when given specific scenarios, New Zealanders have a consistent view of what fairness in financial services means.
The FMA says the findings could be useful for companies covered by the upcoming Conduct of Financial Institutions (CoFI) legislation.
The research was based on a consumer survey in 2023 which involved almost 3,000 people answering questions about fairness.
The survey presented brief ‘real-life’ scenarios involving experiences with financial providers, from missed KiwiSaver guidance to bank responses to Official Cash Rate changes.
Out of the 33 scenarios, 29 described potentially unfair treatment by financial service providers, known as ‘unfair risk scenarios.’ The remaining four scenarios, called ‘neutral scenarios,’ were included for comparison.
Respondents then assessed the perceived fairness of each scenario using a scale of 0 which wasn’t fair at all to 10 which was very fair.
Of the 33 scenarios, 17 were rated as most unfair by half or more of survey respondents while nine scenarios were rated more unfair than neutral or fair and seven scenarios were rated as fair.
From the research, the FMA found 72% of New Zealanders expect fair treatment from their financial service providers.
The perceptions of fairness across different financial sectors were 69% for KiwiSaver providers, 63% for banks, and 57% for insurance companies.
FMA Chief Economist Staurt Johnson told interest.co.nz he was pleased with the research results and the FMA had wanted to undertake the research in order to gain a deeper understanding of consumer fairness.
He said the aim with the research was to understand how a hypothetical but realistic scenario – which a customer might experience in the future – would be perceived as fair or unfair by the majority, as fairness is often seen as very individualistic.
“It's good to have our hypothesis confirmed.”
Johnson said the FMA was interested in tracking how these perceptions of fairness change over time.
CoFI legislation comes into play next year and Johnson said this is likely to increase the level of focus and attention around consumer fairness.
He added that he was hopeful financial service providers, and especially their boards, would use the research to better their own understanding of what constitutes fairness in financial services.
“I appreciate that we've got consumers and providers, and so hopefully this research will help providers understand what's fair from the perspective of customers. But at the same time, I would really like to hear back from providers on their own understanding and their own perceptions of fairness,” he said.
Changes
The Conduct of Financial Institutions Act – or CoFI as its known – was passed by the previous Labour government following scrutiny from the Reserve Bank and Financial Markets Authority into the conduct and culture of banks and life insurers back in 2018 and 2019.
While the National Party’s economic manifesto last year had proposed repealing CoFI because it made credit “more expensive and harder to obtain”, Commerce and Consumer Affairs Minister Andrew Bayly said in January of this year that CoFI was important and the Government wasn’t going to scrap it.
“CoFI serves an important purpose to support good financial outcomes for consumers, but it needs streamlining so financial institutions have certainty and flexibility to get on with the business of delivering for their customers," he said at a Financial Services Council event.
Starting on 31st March 2025, the CoFI regime will enforce the fair conduct principle for financial institutions.
It will also expand the FMA’s regulatory responsibilities to include licensing, monitoring, and enforcement of fairness standards.
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