The headlines look familiar:

[Competition authority] chief calls for more competitive banking sector.

and

[Competition authority] says … petrol market “working well“.

But these are not claims made by Rod Sims or the Australian Competition and Consumer Commission. They are statements from the UK Office of Fair Trading.

What is interesting is the symmetry of issues between the UK, Australia, and other developed countries. Banking, petrol and supermarkets tend to ‘stick in the craw’ of public opinion. This creates political pressure for competition regulators to ‘do something’ about these areas. And the underlying concerns about lack of competition and pricing seem to be  the same even though the structure of the sectors is vastly different between countries. Further, the sectors themselves are ‘different’. Consumers buy petrol and groceries regularly so it is understandable that price changes for these products register quickly for consumers. But banking prices are not ‘day to day’ concerns – at least from my perspective.

Banking involves our major creditor (if you have a mortgage) but the relationship to ‘housing’ doesn’t seem to explain the concern (we do not see ‘real estate agent reports’ very often).

So, is there a binding theme for these three sectors which explains why consumers (and politicians) focus on them so much and do not focus on other similar areas? I can’t think of one, so comments and suggestions very welcome.

6 Responses to Same headlines – different country. Why?

  1. Martin says:

    We may only buy a mortgage every decade or longer, but we pay a mortgage every fortnight or month. In addition, most of us have a credit card which we have to pay monthly. As well, we all use our credit/debit cards every week at ATMs and at other retailers and pay fees every time we do so, so in terms of interactions, I probably deal with banks far more often than any other commercial institution, even more than supermarkets and definitely more than petrol stations and it is compulsory, for most people nowadays, it is very difficult, if not impossible to stay in a purely cash economy, even leaving aside the large advantages the digital economy brings to the consumer.

    As well, in terms of having things go wrong, that definitely happens far more often with banks than with supermarkets or petrol stations. So that increases their salience to a consumer.

    Finally, if you look at your monthly budget, the mortgage would for most people be their largest expense, often their credit card/car loan/personal loan repayment would also be a large expense, as large as their petrol bill or even their supermarket bill. So as a proportion of your budget, interaction with the banks is probably the main component. Though if you have multiple children at a private school, it may fall in to second place and private school fees do get quite a lot of focus IMO.

    The only other aspects that compare costwise and also get paid out regularly are bills (electricity, gas, etc) and they get lots of focus; and insurance (especially health) and they get a lot of focus too. So commonality is that they consume a sigificant part of the monthly budget and it gets paid out every month.

  2. CraigM says:

    They are products seen as somewhat “essential”? Perhaps this makes consumers more suspicious, because they feel somehow backed into a corner. So even though people do not have to use a bank every day, they know that at some stage they do need one. Petrol is the same, for car owners at least. Although consumers know they have some choice among petrol retailers, they know that eventually they are forced to choose at least one. Other products, like shoes or noise-cancelling headphones, can be completely avoided.

  3. CraigM says:

    Sorry, that should be *new shoes (!) Which can be avoided at least to some extent..

  4. Sam says:

    The concern with banking probably also relates to fees on the use of deposit accounts as well, such as ATM fees and transaction fees, which are incurred more frequently like petrol purchases.

    Perhaps there are less reports about real estate agents as their behaviour is of less concern than the vendors or at least difficult to disentangle from the vendors.

    • Martin says:

      Actually, discussions of the inequities of real estate agents is pretty common, articles on this are regularly in the Age and other sources and if you are renting, currently buying or selling, then the issue also arises a lot.

  5. Will says:

    All three are:
    a source of risk – going without food, transportation or money for any period of time is a very bad thing
    Complicated – people understand a farmer at a market selling apples. It feels right. But a complex supply chain (logistics, contracts, storage etc) for an apple is suspicious. Likewise, petrol and money.

    If you need something, but you dont have the faintest idea how it is provided to you, you get worried.

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