In today’s digital marketplace, misleading practices endanger consumers of financial services. This blog explores the tactics undermining trust, inclusion and consumer protection.
What are unfair commercial practices?
Unfair commercial practices refer to business-to-consumer behaviours that aim to deceive or manipulate consumers. By providing false or inaccurate information, or omitting key facts, businesses can pressure consumers and influence decision-making in ways that benefit the bottom line at the expense of the individual.
Certain EU laws and regulations, such as the Unfair Commercial Practices Directive, are intended to protect consumers, but gaps in its current form mean it often fails to make the retail marketplace safer.
The misleading practices harming consumers of financial services
Today, unfair commercial practices are shaping the financial decisions of consumers across Europe, posing a serious threat to consumer protection and financial inclusion.
From influencer marketing and personalised advertising to greenwashing and risky pyramid schemes, today’s digital marketplace is full of tactics that mislead, pressure or confuse. Often, these methods push people towards financial products that don’t meet their needs, and may even harm them.
What’s more, by targeting the less digitally savvy and those with limited access to clear, unbiased information, they undermine trust in the financial system.
This blog explores the practices harming consumers and why stronger rules are urgently needed to make the financial system fairer for everyone.
Influencer marketing
Across Europe, financial firms are increasingly turning to influencers, especially to reach younger consumers.
Data from the UK’s Financial Conduct Authority shows that nearly two-thirds of 18-29-year-olds follow social media influencers. Of those, 9 in 10 have been encouraged to change their financial behaviour.
Finfluencers hold the trust of their followers – often young and vulnerable consumers attracted to the lifestyle they flaunt.
But there’s a catch. Finfluencers often lack the sector expertise to safely guide consumers and may be driven by undisclosed conflicts of interest, such as compensation by the product provider.
The consequences can be serious. Calling for the regulation of influencer marketing, the European Consumer Organisation (BEUC) documented several examples of individuals suffering significant financial harm due to influencer promotions of crypto assets.
In France, a consumer collective filed a complaint against influencers for pushing risky investments with promises of unrealistic gains.
Meanwhile, the Dutch Financial Supervisory Authority has received numerous complaints from consumers who have lost money as a result of influencer tips.
Without strong regulation of the influencer marketing space, consumers will continue to face risks in the retail financial marketplace.
Algorithmic pricing practices that target the vulnerable
In the digital financial marketplace, companies are increasingly turning to manipulative, data-driven price optimisation practices. This personalised pricing isn’t based on risk or service cost, but on how much the consumer is willing to pay. It’s more than just deceptive, it’s harmful.
Using algorithms, firms analyse behavioural data, like shopping habits or how likely someone is to switch providers. They then charge different prices to different individuals for the same product.
According to the European Insurance and Occupational Pension Authority’s 2023 Consumer Trends Report, price optimisation often affects insurance pricing, such as home, health or auto insurance.
The result? Consumers who tend to stick with the same provider end up paying more simply because they’re less likely to notice – or challenge – the pricing.
Data-driven pricing is particularly unfair to the vulnerable, like the elderly or those with limited access to digital tools, who may not have the resources or ability to compare offers.
Ultimately, experts and consumer protection bodies agree: pricing should be based on fair, transparent criteria and not on what a business thinks it can get away with.
Deceptive user experience patterns
Websites commonly use deceptive design tactics, known as dark patterns or black user experience (UX) practices. Increasingly employed in the retail financial services sector, dark patterns exploit human psychology to push consumers towards decisions that may not be in their best interest.
A 2022 European Commission study found that 97% of popular websites and apps in the EU deploy at least one dark UX pattern, taking a variety of forms:
- Creating a false sense of urgency
- Hiding details about risks or additional costs
- Making cancellations more difficult than signs-ups
- Giving prominence to certain options over others to steer decisions
- Repeating requests for the same choice even after the user has declined
In the context of financial products, these misleading approaches manifest themselves in various ways. For example, in 2023 in the EU, consumers lost €30 billion in hidden fees when sending and spending money internationally.
Furthermore, Dave Inc., a fintech firm offering cash advances via its mobile app, faced enforcement action from the U.S. Federal Trade Commission. Although the company advertised no hidden fees, users often couldn’t access the full advance and paid extra for instant transfers — all while a deceptive interface nudged them into paying a tip to receive the service.
Unsolicited personalised advertising
With the help of artificial intelligence, financial services providers are increasingly using consumers’ data to deliver highly targeted ads.
Known as unsolicited personalised advertising, these ads aren’t just tailored, they’re designed to tap into unconscious behaviours and emotional triggers.
For example, someone with a pattern of compulsive spending might be shown ads promoting consumer credit, subtly nudging them to borrow money and spend beyond their means. Over time, this can lead to serious hardship, including debt and over-indebtedness.
What makes this practice especially unfair is that consumers don’t actively agree to this profiling – it happens behind the scenes without clear consent. And it’s becoming more common as digital tools grow more powerful.
By exploiting psychological vulnerabilities, unsolicited personalised advertising raises serious questions of fairness, transparency and consumer protection in the digital financial world.
Greenwashing
As consumers seek to ensure their investments support a fair economy, but also don’t harm the planet, financial services providers have been quick to cater to this growing demand. Yet regulatory shortcomings, inconsistent standards and vague terminology mean these offerings often fall short of clients’ expectations.
This discrepancy is called greenwashing. It’s when businesses market products as green or sustainable when in fact they’re not.
Research commissioned by consumer organisations from the BEUC network found that greenwashing is particularly pervasive in the retail investment space. Sustainable investment opportunities remain limited and, as a result, marketing efforts often outpace the environmental or social impact of the products being sold.
So-called green investment products may feature images of nature, use unverifiable language that evokes greenness or a green feel, or promise positive impact with little supporting evidence. Some restrictions exist, but they rely on vague concepts, leaving leeway for asset managers to develop their own definition of sustainable investment.