Measures that should be prioritised to help consumers become a competitive force in the longer term include: consumer rights to have their financial data transferred directly from one service provider to another, either facilitated through Open Banking arrangements or as part of a more broadly-based consumer data right automatic reimbursement of the of lenders mortgage insurance when a ‘unused’ portion consumer terminates the loan payment system reforms that help detach consumers from their financial providers provision of information on median home loan interest rates provided in the market over the previous month inclusion on insurance premium notices, of the previous premium and percentage year’s change. In contrast to many banking products, consumers are reminded annually of their option to renew general insurance policies. Despite this, renewal of existing insurance policies is the default taken by many consumers. Yet there is a wide disparity between insurers in quotes for essentially the same risks and customer passivity is exploited by providers. The scope is considerable for improvement in consumer outcomes from more information on insurance renewal, such as by inclusion of the previous premium and percentage change on year’s renewal notices. Reforms to address the ongoing issue of provision of credit to SMEs on terms that are commercially viable have the potential to significantly improve the market for SME lending. Improved access of banks to information about businesses seeking credit, particularly new businesses for example, through Comprehensive Credit Reporting, Open Banking and — business accounting software) should better inform lenders of the risk represented by — SMEs seeking access to finance. Reforms that give individuals a greater role in competitive outcomes Consumers are in a weak position in financial services. Reforms aimed at improving the opportunity for individuals to defend their own interests can largely be achieved within the existing regulatory oversight framework. Usable information, without the overload Ensuring a critical mass of consumers have sufficient information to make informed decisions is necessary for a competitive outcome. Financial service providers in the product markets we examined have largely shifted liability to individuals via terms and conditions that are too dense, multi-layered, and poorly designed to understand. An exception is wealth management, under the Future of Financial Advice (FOFA) reforms.
Measures that should be prioritised to help consumers become a competitive force in the longer term include: consumer rights to have their financial data transferred directly from one service provider to another, either facilitated through Open Banking arrangements or as part of a more broadly-based consumer data right automatic reimbursement of the ‘unused’ portion of lenders mortgage insurance when a consumer terminates the loan payment system reforms that help detach consumers from their financial providers provision of information on median home loan interest rates provided in the market over the previous month inclusion on insurance premium notices, of the previous year’s premium and percentage change. In contrast to many banking products, consumers are reminded annually of their option to renew general insurance policies. Despite this, renewal of existing insurance policies is the default taken by many consumers. Yet there is a wide disparity between insurers in quotes for essentially the same risks and customer passivity is exploited by providers. The scope is considerable for improvement in consumer outcomes from more information on insurance renewal, such as by inclusion of the previous year’s premium and percentage change on renewal notices. Reforms to address the ongoing issue of provision of credit to SMEs on terms that are commercially viable have the potential to significantly improve the market for SME lending. Improved access of banks to information about businesses seeking credit, particularly new businesses — for example, through Comprehensive Credit Reporting, Open Banking and business accounting software) — should better inform lenders of the risk represented by SMEs seeking access to finance. Reforms that give individuals a greater role in competitive outcomes Consumers are in a weak position in financial services. Reforms aimed at improving the opportunity for individuals to defend their own interests can largely be achieved within the existing regulatory oversight framework. Usable information, without the overload Ensuring a critical mass of consumers have sufficient information to make informed decisions is necessary for a competitive outcome. Financial service providers in the product markets we examined have largely shifted liability to individuals via terms and conditions that are too dense, multi-layered, and poorly designed to understand. An exception is wealth management, under the Future of Financial Advice (FOFA) reforms.
financial-system-draft-overview.docx