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The UK financial services industry needs an eBay-type ratings system that each customer or counterparty could supply after every transaction, says Simon Culhane, Chief Executive of the Securities & Investment Institute (SII).
In the May edition of the 16,000 strong SII members’ magazine, Securities & Investment Review (S&IR) the editorial “Why we need better feedback” praises the eBay customer ratings system as a key factor in the company’s success. The eBay system offers “a highly visible, individual feedback rating given to each member, which allows users to decide whether they trust the counterparty before committing to any deal.”
The S&IR editorial goes on to say that “an individual’s rating is dynamic and changes according to the simple feedback received from the counterparty on completion of each transaction. The feedback is positive, neutral or negative and is usually accompanied by a brief comment. Both the comments and the ratings are visible at all times to any potential counterparty that is considering entering into a transaction. The rating is expressed as a percentage of positive comments, 100 per cent being a perfect score. It is, in effect, a simple, empirical way of measuring reputation and provides a real expression of trustworthiness.”
In the editorial Mr Culhane argues that eBay customer feedback relies entirely on individuals wanting to protect and enhance their reputation, using no legal rules or power. He draws a parallel with the financial world where reputation and trust are crucial. “What is needed is a measure of proportionality that discriminates between firms with systemic problems and those with occasional blips. Wholesale, private client and retail trades would all be rated”, he says.
The effect on reputations when these ratings are published would be immense: “Counterparties and customers would be able to ascertain the reputation and integrity of a firm immediately. They would have a more informed opinion gathered from tens of thousands of transactions.” Says Mr Culhane.
Firms that adopt a principled approach, as expressed in the SII Code of Conduct, and actively demonstrate their fairness, honesty and integrity will be the winners, the editorial says.
