Consumers must wise up to finance, says McCreevy

A single market in financial services is nothing without its retail consumers. While recent years have seen much integration of wholesale market, retail markets have been far slower to link up.

Retail services, including products such as current accounts and consumer credit, are a key pillar of the European Commission’s financial services action plan launched in 1999. But the retail sector - characterised by engrained habits, cultural preferences and regulatory idiosyncrasies - has been slower to integrate.

Internal Market Commissioner Charlie McCreevy wants to boost integration. Retail financial services were singled out as a top priority in his single market review released last month. Direct cross-border transactions in retail financial services remain low, he said, noting that the prices for services such as current accounts still vary widely among member states.

Competition Commissioner Neelie Kroes, announcing earlier this year the results of her department’s inquiry into the retail banking sector, said that, for instance, in 2004 banks in Luxembourg received €265 for each personal current account compared with just €22 in Sweden. Another discrepancy between national markets highlighted was fees on credit cards in Portugal, said by regulators to be more than double those in Slovakia.

The Commission will now focus on creating consistent rules for the distribution of retail investment products and on improving consumer choice and mobility. McCreevy last month called on the banking industry to draw up a code of conduct that would make it easier for customers to move their accounts from one bank to another. He threatened legal action should the arrangements prove unsatisfactory. "I want consumers to be able to shop around for the best deal in financial services in the same way that they do when buying a TV or a car," he said.

In his bid to increase the pace of integration in retail financial markets, McCreevy will place particular emphasis on financial education for consumers. A consultation launched in April following the publication of a green paper on retail financial services highlighted the need to empower consumers through financial literacy programmes.

McCreevy wants to set the ball rolling next week (19 December) with a paper on financial education. The communication will outline the economic and social benefits of informing consumers, describing current provision of financial education and giving pointers for future action. The commissioner also wants to launch a debate on financial inclusion with the aim of ensuring that every citizen in the EU can open a bank account.

A single market in financial services is nothing without its retail consumers. While recent years have seen much integration of wholesale market, retail markets have been far slower to link up.