Last week, the European Commission issued a green paper on retail financial services and insurance, to try to identify some of the obstacles faced by both consumers and providers and examine possible ways to overcome them. The paper highlights the fact that, while the EU single market can bring considerable benefits in areas where it is well developed, a true European market in retail financial services still does not really exist.    

Current state of play

Overall, very few retail financial service purchases in the EU today take place across borders. There are many good products available, but it is frequently difficult for consumers in one EU Member State to buy products provided in another. This does not just limit choice. The green paper highlights the fact that prices vary widely across the EU: for example, motor insurance for the same customer can be twice as expensive in some Member States as in others.

Average Mandatory Third Party Liability premiums by country

                                                                      Source: www.insuranceeurope.eu

Furthermore, in some markets few consumers are switching products; according to Eurobarometer data from 2012, over 85% of respondents with a personal loan or a credit card had not switched, or tried to switch, to another provider. This in turn can mean fewer incentives for companies to compete. If consumers are able to look for the best deals and switch between providers no matter where they are based in the EU, it encourages companies to remain competitive and provides incentives for new players to enter mature markets.

Digitalisation and innovation

Digitalisation has radically changed the shape of retail financial services in recent years, making services and information about them more readily available. With the digital era, the importance of physical location in particular has reduced. But while digitalisation offers new opportunities, it also brings a number of challenges. For services that were once provided face-to-face, offering them at a distance or cross-border can prove difficult for firms. So the green paper is seeking input in this area in order to further explore these potential difficulties and weigh up the need for action to reduce them.

The Commission's goal is to maximise the practical benefits of a single market in retail financial services, by opening up the market and making it work better for European consumers so they have a bigger and better choice of financial products. The green paper consultation will help to identify the greatest problems and provide input on ways to eliminate them. Once the results have been examined, the Commission will consider whether to publish an action plan on retail financial services in the summer of 2016.

Read more on Retail Financial Services or respond to the consultation