The wires hum this morning with the news that Government are going to ban companies from “surcharging” credit cards to disguise extra margin as “operational cost”.
I’m far from convinced this will get the consumer better value for money. If Ryanair charge you £80 for a flight, you are paying exactly the same as if Ryanair charge you £60 for a flight and £20 in credit card fees. As all the low-cost airlines follow each other’s practices (you check Easyjet, Flybe, BMI etc) you are simply crystallising higher air fares when you stop sucharging.
Now you may argue that the low-cost carriers are not as low-cost as people think and if people knew the true cost of low-cost they wouldn’t fly – which they shouldn’t because they should stay at home – but that would be an argument too far for me. You can’t argue that people need choice (as the Government does every day) and then argue that they can’t chose between the budget airlines (where everything is an extra) and the established airlines which are more expensive but more inclusive in their costs.
If I buy a Toyota, I know I’m getting a fully inclusive deal – if I buy a BMW I know that if I want floor mats – I’m paying for them big time. Customers need to understand what they are buying into and make the choice accordingly.
The Government will never be able to bring real improvements to the consumer by top-down regulation. Improvements for the consumer come from market efficiencies. However I am pleased that in the case of credit cards – the Government are encouraging consumerists that they will be responsive even if the cause – on this occasion – is a weak one.
Far more worrying to me are the areas of consumer purchasing where consumers have no idea what they are paying and still less on the impact of the payment. I am talking compound interest here guys! With an air flight you purchase once , at a given price and once you’ve flown – that’s the end of it. When you buy a financial product– be it a pension or a mortgage, the cost of that product is experienced over its lifetime and for most of us – a pension or a mortgage is for life – not just for the holiday.
We are nowhere near understanding how the charges on most financial products are levied and whether they represent value for money. Try this little baby for starters “Shocking truth about pension charges may do ‘permanent damage’ to saving” – http://lnkd.in/sW_ugu.
There is little or no transparency in parts of the fund management industry. Unlike the Ryanairs and Easyjets of this world, charges are not displayed but hidden deep int he return that you get from the products you invest in. For this reason organisations like the Consumer’s Association cannot get to the truth and being locked out of the pricing structures of the funds, they can do nothing to help you or me to get value for money.
I wouldn’t go so far as to say there is a conspiracy here – it is possible to get value for money from the City, but you are going to need someone like me to show you how to get it and people like me do not come cheap.
That is why I applaud the arrival of organisations like NOW and NEST and B &CE and a handful of new pension providers who are dedicated to delivering real value to the consumer.
The only way that we can get real improvements for the consumer is from the bottom up – from a demand from consumers to get change. That means that you will be hearing a lot more on this in 2012 – hopefully a lot more from the likes of Alan Higham, Tom Mcphail, Ros Altmann and the many many campaigners for fair financial services who are sick and tired of the phony platitudes from those in our industry who continue to pull the wool over the eyes of customers.