The Financial Conduct Authority (FCA) has issued its latest warning to financial services firms to be ready for the 31 July deadline for the new Consumer Duty. There are a number of areas where organisations need to focus their efforts. This is not just for compliance – but to ensure better business performance.
“The FCA’s latest communication has clearly set out that it will act swiftly and assertively where it finds evidence of harm or risk to consumers,” said Peter Lemon, consultant at FICO.
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Clearly damage to reputation as a result of any supervisory or enforcement action is a strong motivator. However, the argument for review of processes goes beyond simply achieving compliance.
Lemon told RBI: “There is often an alignment between consumer expectations and what will help to achieve better performance for a financial services organisation. Achieving excellence in the Consumer Duty arena could therefore be a key differentiator. The better the customer outcomes, the better the experiences reported by customers and the stronger a brand’s reputation becomes. Indeed, the FCA has said itself that it believes Consumer Duty could boost the competitiveness of the sector.”
As financial services organisations countdown to 31 July, FICO has identified the following key areas that must be addressed.
Eliminate silo thinking
The breadth of the Consumer Duty requirements means changes are likely to be needed enterprise-wide. More personalised journeys, processes and decisions must take centre stage as customer needs, characteristics and vulnerabilities become key actionable insights. A siloed approach to operations must be left behind because the provision of the right decisions and customer treatments needs to be consistent across all aspects of the customer lifecycle.
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By GlobalDataUse data fully to understand the customer
The ability to ingest more types of data is key in the development of an understanding of each customer’s characteristics, needs, and vulnerabilities, and then the subsequent reporting and testing of outcomes required by the Duty. In its findings from a review of firms Fair Value Frameworks, the FCA has identified the collection of evidence in relation to outcomes as an area in which focus is still required.
Decision-making must be at a customer level. For lenders with multiple products, this will mean taking account of all the relationships they have with a customer, across all product lines.
Lemon added: “While many organisations have reporting tools in place, there are still a lot of siloed systems. Breaking them down by having all the data in one place provides significant simplification for one of the Consumer Duty’s key requirements.”
Get the right message in the right communication channel
Outcomes of all actions must be monitored, with remedy processes in place and a reactive contact strategy approach, with change capabilities built in.
Tools that provide simulation capabilities can speed up the response to the identification of poor customer outcomes, as they allow the impact of change options to be assessed up front.
And with contact centre service levels specifically flagged by the FCA, financial services providers must consider alternative contact channels for customers which offer convenience and align to their preferences.
