Context
Before the Covid-19 pandemic began, it was estimated that the UK financial services industry would spend £1.9 billion on digital advertising in in 2020, in order to reach customers via their tablets, mobile phones, laptops and desktops. The Financial Services Consumer Panel (FSCP) has expressed concern about the potential for consumer harm linked to digital advertising of financial services, along with the use of technology to build detailed profiles of consumers for targeted marketing that could also leave them open to discrimination and exploitation. This has also been highlighted by the Centre for Data Ethics and Innovation, which has called for greater transparency in the targeting of advertisements.
These concerns were amplified during the onset of the pandemic, with an estimated seven million UK households losing all or a substantial amount of their earned income in the first three weeks of the March 2020 lockdown. There were reports of people trying to access their pensions early, fears of people borrowing more, and fraud and scams looking to exploit a combination of financial anxiety and more time spent online.
The study
This 2020 report from the Financial Services Consumer Panel uses new research to voice the panel’s concerns regarding digital advertising. The panel commissioned two exploratory research studies to further understanding of digital advertising, focusing on two areas – high-cost consumer lending and pension encashment services.
- REO (a digital experience agency) was commissioned in late 2019 to carry out in-depth research to understand digital customer journeys for high-cost consumer lending and pension encashment. The research included:
- 100 surveys with high-cost credit consumers and 100 surveys with pension-to-cash consumers.
- 10 qualitative interviews with high-cost credit consumers and 10 interviews with pension-to-cash consumers.
- ‘Lab’ sessions with consumers who had either used high-cost credit or looked to cash in their pensions in the previous six months. The sessions involved testing consumer responses to real online adverts using eye tracking and skin response technology.
- Social Chain (an online data analytics company) was commissioned in February 2020 to investigate online market strategies used by high-cost lenders and cash-to-pension firms. They also conducted ‘social media listening’ to help understand more about the target audiences for the two products.
Key findings
High-cost credit market
- The FSCP is concerned that digital advertising is targeting already vulnerable customers.
- There are 400,000 Google searches per month on high-cost credit keywords. In January 2020 alone, there were over 10,000 views of YouTube videos featuring high-cost credit.
- The main concerns of the FSCP were:
- How firms target consumers for high-cost credit.
- Customers being drawn to unauthorized clone firms and fake accounts.
- Unclear and possibly misleading online enquiry and application processes.
- Based on the evidence, the panel would like to see the Financial Conduct Authority:
- Conduct further research on personalised advertising.
- Introduce a requirement for the authorised firms to approve financial promotions.
- Put pressure on regulated firms and tech giants to monitor their social media platforms more effectively.
- Consider new rules making risk warnings on adverts more conspicuous.
- Prioritise work to update the FCA register and directory.
- Continue to invest in technology to help identify fraud.
Pensions-to-cash market
- The FSCP is concerned about a lack of transparency and the role of unregulated brokers.
- There are around 25,000 Google searches per month on pensions-to-cash keywords. In January 2020 alone, there were over 56,000 views of around 4,000 YouTube videos featuring pensions-to-cash.
- The main concerns of the FSCP were:
- Unregulated brokers operating in the market.
- Poor disclosure of regulatory information and risk warnings.
- Firms targeting the under-55s.
- Based on the evidence, the panel would like to see the FCA:
- Investigate the digital marketing practices of brokers.
- Review the effectiveness of disclosure on firms’ websites.
- Investigate the digital marketing practices of brokers who target the under-55s and the regulated firms who pay them for marketing.
- The evidence calls into practice whether activities in both markets are acting in accordance with the FCA’s Principles for Business, especially with vulnerable consumers.
- The research and concerns have already been shared with the FCA, and the authors aim to use the paper to facilitate wider discussions with the FCA and other regulators and stakeholders.
Points to consider
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Methodological strengths/weaknesses: o While little information on the methodology is included, the analysis appears to be based on comprehensive research from specialist companies, using mainly descriptive statistics.
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Generalisability/ transferability: o This report is of significant interest to politicians, policymakers and other stakeholders who are interested in digital advertising in financial services, in particular to those concerned with the high-cost credit or pensions markets.
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Relevance: o The findings are situated in a UK context, though some of the learnings may be transferrable to countries with similar financial regulatory environments.
