Risks Rising: Customer Protection Moving into Regulators’ Focus

Fintechs are expanding their market share across the financial services spectrum, from retail banking and investment management to lending and innovative insurance services, to name but a few. As next-gen institutions scale their businesses, regulators around the world have taken notice and are adding more rules to protect customers. There is growing scrutiny of customer interactions, which can pose significant regulatory and reputational risks for fintechs. Here are four potential problem areas to evaluate along with tech-driven solutions to mitigate threats related to customer interactions: 

New communications channels: opportunity and risk

Today’s consumers use a multitude of communication channels on a daily basis, and financial institutions are looking to interact with their clientele across these digital platforms, including instant messaging services and video chat. Adapting to this new reality, regulators allow for digital platforms to be used in an increasing number of verticals, but have put in place stringent rules of conduct. For example, in a recent revision of Reg F, the Consumer Financial Protection Bureau (CFPB) now allows debt collectors to use social media, email, and text to contact borrowers, increasing the number of platforms to monitor for non-compliant conduct. With new opportunities come new risks: in this case, new channels to monitor and integrate into institutions’ compliance process.

In this new multi-channel communications reality, consolidated monitoring and archiving solutions have become essential. To manage compliance, financial service organizations need to adopt new technologies that help them to track, monitor, and analyze communications - regardless of where they occur - and follow the customer journey from first contact through the lifetime of the relationship.

Data privacy

Companies are collecting massive amounts of data, helping them to analyze client interactions,  offer personalized services, and build new products. However, the way data is transferred, processed, and stored must be closely monitored to ensure data protection and storage rules are followed. Especially in the era of CCPR, GDPR, and Right to Be Forgotten, organizations are required to have a comprehensive overview of where client data is being stored and used. 

Particular attention must be paid to the entry point of protected data into the organization’s systems. Oftentimes, clients disclose Personally Identifiable Information (PII) and other protected data during communications with service representatives. To reach full privacy compliance, institutions need to have systems in place that act as “gatekeepers” and can identify and protect personal information from the very first interaction between client and service provider before the data is processed and archived.  

Marketing and advertising 

With the explosion of alternative banking platforms and digital finance offerings, regulators are paying close attention to the marketing efforts of financial institutions to protect consumers from misleading advertising. Consumer complaints against fintechs increased by almost 180% in the first half of 2021 compared to the year prior and fines are growing.

With more marketing channels available than ever before, businesses are putting a strong emphasis on ensuring that each ad and piece of promotional content conforms to corporate brand guidelines and complies with regulations governing ad content. AI can help pre-check the print and copy of each campaign - before publication and distribution. To retain brand credibility and stay out of regulatory crosshairs, it is critical for fintechs to monitor text, image, and video ads across marketing channels. This is all the more critical with affiliate marketing schemes in place with third parties advertising branded goods and services. 

Under the lens: Debt collection

While Buy Now, Pay Later (BNPL) solutions have proven popular with consumers and merchants, they are also leading to a rising debt collection industry. Close to eight million BNPL customers had outstanding debts totaling $5.49 billion in the United Kingdom alone. 

As BNPL defaults and debts increase, regulators are concerned about aggressive and abusive debt collection efforts. To monitor and track interactions between debt services, collectors, and customers, unified recording and monitoring solutions are essential. With frequent updates of rules and guidelines on the horizon, businesses are well advised to select solutions that let them quickly implement new rules and automatically train customer-facing personnel to comply with them. 

Regulators are zeroing in on customer interactions in financial services. At the same time, next-generation fintechs are scaling their operations to expand into new services and markets. It’s a huge lift for emerging financial providers to understand, track, and implement new customer protections quickly. Fortunately, technology can solve many of these challenges. AI-powered tools and automated platforms can support the compliance journey, helping businesses move quickly without the risk of falling out of compliance.