ART can bridge the divide between accessibility and compliance

For many years, and especially in tough times, revenue from the sale of financial services’ products has boosted retailers’ and corporates’ bottom lines, providing much needed revenue when core business lines weren’t faring quite as well as they did in the past. And generally it was a pretty easy sell: supplying products to a captive market that already knows and supports the retailer’s brand.

Traditionally, business cycles have waxed and waned, shifting between core and non core business. But, when it comes to financial services’ products, the debate about consolidation versus diversification will not, in future, predominantly be driven by shareholders and investors, but rather by legislation.

In recent years, fast changing legislation and the growing compliance burden that it has brought about has made it more difficult for affinity groups to keep pace with what is expected in an area which is, after all, not their core business. And this trend is expected to continue for the foreseeable future.

There’s no doubt that, for many of those corporates making additional revenue out of financial services’ products, the compliance burden will eventually be so consuming that they could reach the point where they are forced to either outsource the business or walk away from it all together. There is also the matter of the cost of compliance to be considered: it is not inconceivable that compliance costs could erode much of the additional revenue, leaving affinity groups questioning the value of the offering.

The dilemma facing affinity groups was clearly evident when a large bank recently bought a major furniture retailer and immediately set about converting the practice of entering into credit agreements with customers to one of issuing personal loans, since the regulatory environment for the latter is presumably more lenient.

All of this comes at a time when there is a huge drive from the government to make insurance accessible to all sectors of the population and there can surely be few sectors that can do this as effectively as retail channels can. The answer lies then in finding a balance between accessibility and compliance, in finding ways to meet the latter without compromising the former.

No matter how much affinity groups want to retain the additional revenue, and no matter how seriously they take their social responsibility to provide access to financial services’ products, increasingly onerous point-of-sale compliance obligations will undoubtedly force many retailers to rethink their financial services’ offerings.

This is potentially good news for the more specialised and niche insurance market, which is ideally placed to step into this space. Cell captive insurers already have the structures in place to supply their clients with the necessary support and services to enable them to meet their regulatory and compliance requirements. These insurers are already well established in the affinity market; offering retailers an efficient and cost effective solution that effectively creates a win-win solution for corporates and their customers.


For further information please contact:
Herman Schoeman, MD of Guardrisk
Telephone: 011 669-1001

Prepared  by:
Melanie Davis, PR@Work
Telephone: 011 615-3309 / 083 225 7450