The FCA has published a speech by its chief executive, Martin Wheatley. The speech is entitled Making competition king – the rise of behavioural economics at the FCA.
In his speech, Mr Wheatley discusses how the FCA is using behavioural economics to support increased competition in financial services. Effectively, the challenge for the FCA is how it uses this science to encourage firms to compete more determinedly on price and product quality.
Mr Wheatley states that there is little doubt that behavioural economics could have a profound impact on many of the most serious challenges facing policy makers today, including the key question of how they help households discipline markets more effectively. From the FCA’s perspective, it is already seeing significant possibilities across a range of UK markets like cash savings, general insurance and retirement income. It also believes that there is an opportunity for behavioural economics to support more specific issues like complexity, consumer inertia, marketing and the impact of firm communications to consumers.
The FCA feels that behavioural economics is quickly becoming a “game changer”, not just for firms and consumers but also potentially for the shape of regulation for time to come. One of the areas the FCA is now investigating is whether behavioural economics can offer insights into how individuals within organisations behave and respond to regulation. A priority question here is what does this teach the regulator about the way it intervenes in the market? Are the day-to-day interventions relied upon as effective as it imagines?
View Making competition king – the rise of behavioural economics at the FCA, 25 March 2014