Too good to be true?
Time will tell whether the recent crash of Crown Currency Exchange in the foreign exchange market will be a watershed which changes public attitudes to the online comparison sites. As anyone who listens to Radio 4 will know, its demise featured on both You and Yours and Money Box. The focus was on how a company in such dire financial straits could retain its position at the top of the Best Buy lists.
The simple answer is that they bought the position by punting their punters money of the exchange markets.
The Financial Services Authority had no responsibility to regulate CCE despite the company handling £150million worth of transactions since 2005. According to the BBC’s Money Box, Crown Currency Exchange was registered with the Financial Services Authority, but as the FSA classified it as a Small Payment Institution it was not required to be authorised, and so did not have to hold separate accounts for client money.
Shame on them, one might say.
But stop. Haven’t we been here before? When Northern Rock crashed in 2007 it was pretty much for the same reason – offering customers deals which were ‘too good to be true’. And we all took them, without stopping to think about why they were so ‘competitive’ (there’s a misnomer if ever there was one).
The question is whether it will alter our views of the comparison websites which compare rates but, it would seem, aren’t equipped to look at company financial stability. Actually, research seems to show that although people do buy the best buys, they also tend to look for the highest performer against brands that they know. In other words people they can trust.
So perhaps the consumer is cannier than we give him credit for. Which is why CCE have gone down with only 13,000 customers, not 13 million.