Oliver Crawford

By Oliver Crawford

One of the four outcomes of the Financial Conduct Authority's (FCA) new Consumer Duty is that consumers should receive 'products and services [that] meet their needs and offer fair value'.

'Fair value' in this context doesn't refer to low prices, but means that there is a reasonable relationship between the price that consumers pay and the benefits that they get.

At Fairer Finance, we regularly poll thousands of customers to ask what they think of their banking and insurance providers. Starting with our most recent wave of polling, in autumn 2022, we’ve added a new question:

‘How would you rate the value you get from this provider, thinking about the relationship between the benefits of the product and the price you pay?’

Respondents can give the following responses:

  • Excellent Value

  • Good value

  • Fair value

  • Poor value

  • Terrible value

We use these responses to calculate a ‘value for money score’, using this formula:

(Excellent value x 2) + (Good value) + (Poor value x -1) + (Terrible value x -2) / Total / 2

We use this formula to give additional weight to those who say they are getting excellent or terrible value, and to create a single score through which we can compare providers.

Excluding brands that do not meet our sample size threshold of 41, these were the results of our polling:

We found that customers’ responses were broadly similar across banking and insurance sectors.

As the chart below shows, the most common response was ‘good value’.

Banking and credit sectors showed greater variation than insurance sectors. On average, more respondents picked ‘excellent value’ and ‘terrible value’ in banking/credit sectors than in insurance.

Savings accounts had the largest share of customers saying they received ‘terrible value’ or ‘poor value’, likely due to frustration at persistent low interest rates (despite recent rises in the Bank of England base rate).

Even in the savings sector, though, only 9% of customers picked the ‘terrible value’ or ‘poor value’ options. Most were positive about the value they got from their provider.

Value for Money and Customer Satisfaction

Fairer Finance also regularly polls customers on how happy they are with their provider.

Respondents can pick the following options:

  • Extremely satisfied

  • Fairly satisfied

  • Neither satisfied nor dissatisfied

  • Fairly dissatisfied

  • Extremely dissatisfied

These responses are used to calculate a ‘happiness score’ using a formula with the same format as the ‘value for money score’ above.

As you might expect, our data shows that happiness scores and value for money scores are highly correlated.

Providers with very high levels of customer satisfaction, such as Starling Bank, Chase, or American Express, tend to have customers who believe they are getting good value for money.

Conversely, providers with poor customer satisfaction, such as AIB and RBS, also have fewer customers who think they are getting good value for money.

Differences in region, gender and age

Value for money scores are very similar across most demographic measures.

Men and women have similar perceptions about the value for money they’re receiving from their providers.

There are some differences in value for money scores across the regions of the UK. In both banking and insurance, people in London and the north of England are more content with the value they're getting from providers than those in the south of England, the midlands, or Northern Ireland, Scotland and Wales. Those in the south have the lowest value for money scores, on average.

When it comes to age, we also find some variation. Young people (aged 18-35) tend to think they’re getting better value for money than older people.

This may be because young people are more willing to shop around for banking or insurance products.

Our data shows that young people more frequently say they are likely to switch providers in the next 12 months than older people (especially those over 65). This could mean that they get better value for money, by searching for good deals.

Alternatively, young people may think they’re getting better value because they are less knowledgeable about the range of products available. This relative ignorance may lead them to assume that their provider is giving them good value, unlike older people who have a better sense of what constitutes good value thanks to longer experience of choosing financial products.

Price and value

Price and value for money don’t have a straightforward relationship. A product may be expensive yet still offer good value, while a cheap product may be of such low quality that it represents poor value.

In our polling, we ask customers why they bought their insurance policy. Two of the options are:

  • It was the cheapest on a comparison site.

  • The product was cheaper than others on the market.

Our analysis shows that there is no correlation between the percentage of customers who chose their policy based on its cheapness, either through a comparison site or by scanning the market themselves, and the value for money score. In other words, choosing the cheapest policy does not guarantee good value for money.

Some providers, like NFU Mutual, which are rarely chosen for being the cheapest, score highly for value for money.

Similarly, American Express, a credit card provider with some of the highest annual fees and APRs in the market, is top of the credit cards value for money league table, suggesting its customers judge that the benefits of the product more than make up for the cost.

The Consumer Duty

The FCA's Consumer Duty aims to improve 'fair value', ensuring that consumers 'pay a price for products and services that represents fair value and poor value products and services are removed from markets leading to fewer upheld complaints about poor value and unexpected fees or charges.'

Our polling shows that most customers are satisfied with the value they are getting from their provider. Nonetheless, there remains room for improvement, both in that some providers have more satisfied customers than others when it comes to value for money, and in that there are a minority of customers who believe they are getting 'poor' or 'terrible' value.

It will be interesting to see whether changes implemented to help meet the Consumer Duty's fair value requirement improve customers' perceptions about value for money - something we will be able to monitor through our value for money polling.

As our data shows, value for money is not synonymous with price, so providers should consider both the benefits they are offering as well as the price that they charge when assessing the 'value' that their products offer.

Fairer Finance has a range of tools and services to help firms meet the requirements of the consumer duty. For more information contact corporate@fairerfinance.com