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Changing markets – regulation and refinement

Over the past few years, the UK has seen Government involvement in a number of sectors – primarily those affected by either scandal in the media or those repeatedly highlighted by consumers as being problematic or cause for concern. The Government’s involvement has often revolved around the implementation of new legislation or new regulatory powers for bodies operating within the sector, and has had far-reaching implications for businesses.

We have already seen regulation within the aviation and finance sectors, as the Government has implemented European legislation relating to delays and mis-sold financial products, respectively.

This pattern seems set to continue, with new legislation coming into effect that will have an impact on a number of industries. What can we expect affected markets to look like? Resolver explores the matter below.

Pensions

The pensions sector is soon to be affected by new regulation, including a proposed ban on pensions cold-calling. As it stands, consumers are vulnerable to pension scammers, who frequently make contact over the phone to persuade them to move their savings to unregulated pension schemes. Consumers have known to have lost at least £42m to pension scams since 2014, according to the City of London Police. The Government has identified this as an area of particular concern, and is working to remedy the situation. They have proposed that there is a single source of advice for consumers, helping consumers find consistent guidance regarding their pensions – a necessary change, given that less than a third of people felt they were saving enough for retirement, and four-in-ten people did not know how their pension worked.

Studies concerning consumer behaviour show that a lack of awareness regarding a product or service does not encourage positive consumer sentiment. A transparent and informative approach is essential to maintaining a healthy customer base. A good example of a similar model of behaviour applies to queuing – customers are less likely to leave a queue if they can see exactly how long they’ll be in the queue and see exactly where they stand in the queue.

The Housing Market

Over the last months, government consultation has taken place on strengthening consumer redress within the housing market. The Government has requested input on its policies regarding consumer redress within the housing market and is examining whether significant changes are needed to refine the regulatory landscape of the housing market to benefit consumers. This is currently an area with little or no defined regulation – while the sector is supported by a number of ombudsmen doing excellent work to deliver adjudication, many areas of the market are unserved by adjudicators or unregulated (including new build/development). Resolver has helped consumers resolve over 20,000 issues within the housing sector, showing this is an area of significant concern to consumers. It is likely that the new system of housing redress will demand significant reform from many companies operating within the sector.

Gambling

Gambling represents a sector in which new regulation is currently being implemented. A proposed cap on possible bets using fixed-odds betting terminals (FOBTs) has featured prominently in the news of late, and has been heavily discussed in Parliament. The proposed cap comes after the Gambling Commission published its findings regarding the controversial betting machines, which previously allowed users to bet up to £100 every 20 seconds, leading many consumers to engage in dangerous patterns of betting.  While many have expressed concerns over the amount at which stakes are to be capped, it is undeniable that the Gambling Commission is very active in promoting fairer practices. The Commission has also tackled various areas of concern around advertising, promotions and accounts, targeting areas of specific concern for many consumers. It may take a couple of months for the market to adjust to the new regulations, but it is clear they will have a significant impact on the manner in which the market functions.

The effect on business and industry

It is likely that changes made to ensure compliance with any new regulation will have some significant repercussions. The gambling industry, for example, has indicated that the implementation of a £2 cap on FOBT stakes (as suggested by the media) would result in the closure of many betting shops across the UK.

That being said, any potential loss of revenue caused by regulation could be offset by an improved consumer-business relationship – and this can offer significant benefits to businesses.

Studies have shown that an increase of only 5% in customer retention rates can cause an increase of up to 95% in revenue, and, as we see in our data concerning consumer satisfaction (CSAT) and net promoter score (NPS), regulated industries tend to have higher scores than unregulated ones. The housing market has, for example, previously sat at NPS and CSAT scores of around 3 within Resolver’s system, retail (another unregulated sector) sits at a score of 4 for both metrics, while flights and PPI have average scores of around 5 for NPS and 6 for CSAT. In part, this indicates that companies within regulated industries with a  clear route for consumer redress are more likely to have improved customer retention rates – potentially representing an opportunity for increased revenue!