Chief Executives probably have a natural bias in favour of publicising their organisations. It’s not a bias I share. If FSCS is going to spend money – levy payers’ money – on raising awareness of our protection, there has to be a good reason for it.
So what do we consider good reasons for raising awareness and, where we do, how do we ensure value for money?
Let me start by saying that raising awareness cannot be an end in itself. We only spend money on marketing where doing so helps to meet FSCS’ mission of underpinning consumer confidence in financial products and stability. We do it for a hard business purpose.
To put it another way, we must have evidence that lack of awareness is detrimental to the industry and consumers: either where people are steering clear of useful products because they’re unaware of our protection and think those products are riskier than they really are; or where people are taking on risks unknowingly assuming FSCS will protect them when we can’t.
Both factors lie behind our current programme, which will cost £3.6m in 2014/15, to raise awareness of FSCS protection of deposits.
First and foremost, we want to ensure that in any future crisis savers do not pull their money needlessly out of a troubled bank, building society or credit union and so deepen liquidity problems at the worst time. Think Northern Rock. Consumer awareness of FSCS protection can help to prevent such runs in the future.
So our message is clear: provided the firm concerned is UK-regulated and provided the saver has no more than £85,000 in that firm, FSCS will get a saver’s money back in no more than seven days.
We also publicise the £85,000 limit because we want savers – a small minority – with more than £85,000 to be aware that there is a risk to savings above this threshold held in the same firm. It’s then up to savers whether they act on that knowledge, but they should not expect the government to meet unprotected amounts. People need to know there are limits to our protection.
We will continue to apply exactly the same tests to all our future work to raise awareness of the protection we provide in other areas of financial services. This includes any future extension of this work to insurance or investments.
We shall want to be clear whether current low levels of awareness of FSCS protection are leading consumers to avoid some products unnecessarily or pile in to others without sufficient regard for the risks. In other words, we shall need to be convinced that there is direct link between low awareness and detriment to consumers.
And, even then, we shall need to be persuaded that there are clear and straightforward messages which would help consumers make better choices. Marketing may not be the answer in all cases. There may be better ways of reaching consumers, for example, about investment protection.
What is more, I also want to underline that these are judgements on which we shall want fully to engage the industry’s own trade bodies.
All of the trade bodies, along with consumer organisations, are part of our long-standing Consumer Awareness Advisory Panel. They played a valuable role in helping to shape our current strategy and in supporting our work in this area. The trade bodies will continue to play a part in our awareness programme in the future. Industry support is vital to raising awareness of the Scheme.
There are two good reasons for industry involvement.
The first and fairly obvious one is that the industry is one of the best ways of reaching consumers.
It would simply not be justifiable to spend levy payers’ money on an awareness raising programme which the industry did not back. So, the cost of our current campaign to raise awareness of FSCS protection of deposits falls on banks, building societies and credit unions and does have their support. Indeed, we know from both our own independent studies and research by firms that knowledge of FSCS raises customer confidence and comfort in financial services. That benefits the industry and financial stability.
But the second takes us back to value for money: no FSCS campaign can work without active support from our partners in the industry.
While FSCS can provide some seed corn funding, we rely on the industry itself to do the heavy lifting by publicising FSCS protection in branches and on websites and, increasingly, by referring to FSCS protection in its own marketing.
That is the strategy which underpins our current campaign to raise awareness of deposit protection. It’s a strategy that’s working. We’ve seen awareness of FSCS protection rise above 50% of the population for the first time. And we know from our market research that FSCS’ own marketing and the industry’s complementary support have contributed in roughly equal measure to that rise. All of these elements have to work together to do the job.
So FSCS will only spend money on awareness raising where there’s a good case for doing so and will continue to engage with the industry because industry funding and support is crucial to success.
Raising awareness of FSCS protection is about building the consumer confidence which benefits financial stability, the industry and the economy. It is something in which we all have a stake.