Re-Building Consumer Trust on Retail Financial Products

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With insurance companies and banks shutting down, leaving clients on a limbo, trust in the financial sector has hit rock bottom. People have been burned, and it is likely they would make the same mistake by buying another financial product.

This is why the European Commission launched a green paper in December 2015, designed to look at ways to promote sales of loans, bank accounts insurance, and other financial services across borders.

While the idea has merit, however, there are challenges that need to be addressed.

  • The natural way to build trust is personal interaction. Selling across borders would result in the opposite, as this would mean digital delivery and distance selling.
  • Cross-border selling can give rise to mis-selling scandals or financial exclusions. This means the EU has to find ways to prevent this type of selling.
  • There is a need to keep retail giants and big banks from closing down local competitors. Part of this is to come up with measures for consumer protection.


For every problem, however, there is a solution.

A standardized way of disclosing information for retail financial products, particularly the basic ones, would help lessen the confusion consumers feel about such products. What are the odds that most of them skip “terms and conditions” because it is too complex to understand, or that other providers say something different?

It is also helpful if they can warn consumers away from products that are complex and unsuitable for them. A comprehension alert will go a long way in building trust. It will give an impression that providers are not just in it for the money.


For new financial products, introduction of supervisory pre-approval or product rules will protect consumers from harm, which will result in increased trust and sales volume.

As what Professor of Economics at Yale University, Robert J. Schiller said, “The severe financial crisis that began in 2007 was not due to any failures in the traditional banking business model, but instead to certain new kinds of business models”.