1. Fairness in Financial Services Dr Harjit Singh Sekhon Email h.sekhon@coventry.ac.uk

2. Acknowledgements Professor James Devlin – University of Nottingham Business School. Assistant Professor Sanjit Kumar Roy – University of Western Australia Business School. Presentation draws extensively on: –Perceptions of fairness in financial services: An analysis of distribution channels (IJBM, forthcoming). –The impact of fairness on trustworthiness and trust in banking (JMM, forthcoming). –Perceptions of fair treatment in financial services: Development validation and applications of fairness measurement scale (EJM, Vol. 18, Iss. 7/8, pp. 1315-1332).

3. Its all about being fair Starts early on with “oh its just not fair…..” In services situations fairness is about the perceptions held by the customer, and is something that can be influenced. Fairness in business relationships is about making sure due process is followed, and being able to demonstrate that the process has been followed.

4. The importance of fairness Important for ensuring sufficient interactions. The buying process is complicated by the variety and complexity of product types. Policymakers such as the Financial Conduct Authority is keen to make sure that there is sufficient engagement on the part of customers to provide for themselves. Greatest engagement is likely if customers feel they are fairly treated. Increased level of fairness likely to have welfare consequences and be beneficial for commerce. Generally a lack of knowledge has resulted in the over consumption of debt products v long-term savings.

5. Procedural fairness The perceived fairness of how service exchanges are conducted, in terms of policies, processes and procedures. This about transparency and impartiality. Customers are most positive when they have some input and control over the exchange. Where there is procedural fairness, the chances of a positive outcome are increased. The sub-dimensions are that it has be impartial, irrefutable, clear explanation and familiarity.

6. Distributive fairness This form of fairness is related to inputs and outputs. Compared with procedural fairness, distributive fairness is grounded on justice. It is about how the pie has been shared, what is the individual’s share. Did they get a fair share of what is due to them. For services the share can be a monetary or non- monetary value. For financial services it is about doing what they said they were going to do.

7. Interactional fairness While procedural fairness is about the process, interactional is about the interpersonal component. Interactional fairness is important where the offering is high in credence qualities. Critical for services because of the interaction between the buyer and seller. Sub-dimensions are bi-lateral communications and courtesy towards the customer. For financial services, it is about caring and benevolent type behaviours.

8. Research methodology See Devlin et al., (2014) for a full elaboration of our scale development and validation. The initial item pool was purified and the remaining items discussed with academics. The items were informed by Tax et al., (1996); Patterson et al., (2006); Kumar et al., (1996); and Leventhal (1980). The items were anchored 5 to 1. Initial pilot with 30 mature MBA students to see how the instrument was being interpreted. Initial pilot was followed up with further pilot with 50 members of the public, using a CATI approach.

9. Research methodology Data collected from customers of ‘retail’ financial services. Data collection undertaken by a well-known UK opinion polling company. Data reported were collected during the middle of 2013. Some participants completed the survey on-line while others via a email link. In total 1,010 units of data, stratified broadly along the lines of type of provider. 173 branch; 289 telephone; 456 Internet; and, 92 postal mail.

10. Implications Fairness in financial services is important given its impact on society and for policymakers. When customers view the way want to engage, they tend to have a preference for the traditional distribution channel (i.e. branch). The opportunity for direct interaction is a key component of demonstrating fairness. Dealing with providers via the Internet is rated as the second lowest, with postal mail the lowest. Lower rating of the Internet is probably because of the arms-length nature of the relationship not allowing for bi-lateral communications.

11. Implications Internet is probably rated low because of customers’ confidence. The idea of confidence as an enabler in helping build trust, and confidence could be increased if system fail-safes are in place. To show distributive fairness providers have to show that the deals they provide are fair and concise. The terms of doing business have to be seen to be fair.

12. Implications Interactional fairness means showing consideration towards customers’ needs. Demonstrating consideration can lead to elevated levels of satisfaction and trust. The lack of real-time engagement limits what is available via the Internet in terms of displaying fairness.

13. Summary Fairness is a central strategic tool that financial services providers can use. It seems that greatest fairness is shown when the relationship is not at arms-length. Demonstrations of fairness can lead to elevated trust levels and greater confidence to make purchase decisions.