eBay Ratings For Financial Services?
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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 the Securities & Investment Institute (SII).
In the editorial of the latest edition of Securities & Investment Review Simon Culhane, Chief Executive of the SSI, says, that the financial services needs a way for clients and customers to be able to rate each other in a transparent way.
He follows up that 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."
"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.
Culhane argues that the eBay method is ideal. "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."
Firms that adopt a principled approach, and actively demonstrate their fairness, honesty and integrity will be the winners.
Some commentators have questioned the reliability of such a system touting examples of eBay buyers deliberately black marking sellers with good ratings. However, this ignores the fact that there is no value in a client black marking a good supplier when they may themselves be rejected by the supplier for future trades. You may not ever have to deal with the eBay seller selling you your replacement oven bulb again but if you find a good firm to trade with then you don't jeopardize that relationship by falsely black marking them. Clearly what would be required is some conflict resolution procedure.
He follows up that 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."
"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.
Culhane argues that the eBay method is ideal. "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."
Firms that adopt a principled approach, and actively demonstrate their fairness, honesty and integrity will be the winners.
Some commentators have questioned the reliability of such a system touting examples of eBay buyers deliberately black marking sellers with good ratings. However, this ignores the fact that there is no value in a client black marking a good supplier when they may themselves be rejected by the supplier for future trades. You may not ever have to deal with the eBay seller selling you your replacement oven bulb again but if you find a good firm to trade with then you don't jeopardize that relationship by falsely black marking them. Clearly what would be required is some conflict resolution procedure.
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