From influencer promotions to greenwashing, here’s how misleading tactics affect financial decisions.
What does “unfair commercial practices” mean?
Unfair commercial practices refer to behaviours designed to mislead or pressure consumers into making decisions they might not otherwise choose. These often involve presenting incomplete or misleading information, creating a false sense of urgency, or using design tactics that make opting out difficult.
While EU regulations like the Unfair Commercial Practices Directive aim to protect consumers, gaps remain. In today’s digital marketplace, certain practices continue to create challenges for transparency and fairness, especially in financial services.
How these practices impact consumers
Financial services are highly regulated, but misleading strategies still emerge, particularly online. From social media promotions to algorithm-driven pricing, these tactics can lead consumers toward products that may not meet their needs or could even cause harm.
More Details
- Influencer Marketing and Financial Advice
Financial brands increasingly use influencers, or “finfluencers,” to reach younger audiences. The Financial Conduct Authority (FCA) found that nearly two-thirds of 18–29-year-olds follow influencers, and nine in ten have changed financial behaviours because of them.
However, influencers often lack expertise and may be compensated for promoting certain products, creating potential conflicts of interest. In some cases, consumers have faced significant losses after following influencer recommendations, particularly around crypto assets.
- Algorithmic Pricing and Personalised Costs
Some companies use advanced data analytics to predict how much a consumer is willing to pay, not based on risk or cost, but on behaviour. For example, loyal customers may be charged more simply because they’re less likely to switch providers.
Research from the European Insurance and Occupational Pension Authority highlights that this practice is most common in insurance products, raising concerns about fairness and transparency.
- Dark Patterns in Digital Design
So-called “dark UX patterns” are design elements that make certain choices more prominent or create urgency to influence behaviour. Examples include:
• Making it harder to cancel than to sign up
• Hiding fees or risks in small print
• Repeating prompts to opt-in even after a user declines
In financial products, these patterns have contributed to significant costs for consumers, such as hidden international transfer fees.
- Targeted and Personalised Advertising
AI-powered personalised ads often use behavioural data to target consumers. For example, someone prone to overspending could be shown credit ads that encourage borrowing, leading to potential debt issues. These ads are typically shown without explicit consent, raising questions about transparency and fairness. - Greenwashing in Investment Products
As sustainable investing gains popularity, some firms label products as “green” without clear evidence. Studies by European consumer organisations have found that sustainability claims often lack standardised criteria, leaving investors uncertain about the true impact of their investments.
The Bottom Line
While regulation continues to evolve, today’s digital financial landscape presents new challenges for consumer protection. Staying informed about these practices can help consumers make decisions with greater clarity and confidence.
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The value of your investments and any income from them can fall as well as rise. You may not get back the amount you invested.
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