The countdown to the Consumer Duty is well underway, with the new regulation aiming to usher in a golden age for customers across the UK.

The FCA says its rules will set higher and clearer standards of consumer protection across financial services. They will require firms to put customers’ needs first, focusing on four key areas: products and services, price and value, consumer understanding, and consumer support.

The ambition is ultimately to drive better outcomes. That sounds very uncontroversial – surely we all want good outcomes for our customers? But there are still some difficult questions to tackle.

With the clock ticking ahead of the implementation date on 31 July, we gathered around OBE’s virtual Campfire to discuss what firms need to do to meet the incoming deadline, and what opportunities will open up as a result. 

I’m extremely proud to say we had an all-female panel, expertly hosted by our guest – Simoney Kyriakou, Senior Editor, FTAdviser. This is an all too rare occurrence, and something our Pass the Mic campaign seeks to address.  

Understanding the regulatory perspective

Preparing for the Consumer Duty has been a considerable undertaking for the FCA, which is keen to drive more customer care in financial services. 

“It’s a big project,” said Helene Oger-Zaher, Manager – Payments Policy, FCA. “It’s cross-cutting, so it goes across every sector we regulate. It’s about being transparent and explaining in simple terms what the product might mean, the impacts on consumers, and what they need to understand.”

Helene Oger-Zaher was also quick to point out the parallels between Open Banking and the Consumer Duty. “There is real alignment between Open Banking and what we’re trying to do,” she explained. “Open Banking technology, and the broader sharing of financial data, absolutely has the potential to transform how people manage their finances. It gives consumers the tools to be better informed and make different choices.”

“I think the most positive takeaway is that it’s focused firms on the customer,” added Samantha Seaton, CEO, Moneyhub. “It’s made us all take a step back, and think about whether we really do put the customer first. The responsibility for ongoing suitability is now with the product providers. I think the big challenge for many will be moving away from a product-led business to a truly customer-centric business.”

Assessing preparedness

So how ready is the industry? “We’ve spent time with various clients and customers, and I think people are on different journeys – they’re all in different places in terms of competence levels and delivery,” said Aman Virk, Customer Transformation Senior Director (FinTechs), Salesforce.

“I love the journey analogy,” added Anne Godbold, Non-Financial Risk Specialist, Accenture. “Clients I see are going to be substantially ready for the end of July. They’ve done a lot of work to get where they want to be, but it was a really big ask, especially if you’re looking at bringing in new data streams, changing your processes, or changing systems and technology. And then embedding that and getting your people to really understand what’s expected of them.”

“Some of the most complicated areas are around customer communications,” continued Godbold. “It really feels like a paradigm shift from a ‘clear, fair, and not misleading’ approach where we are today, to a place where your average customer can understand it and take the right action.”

How financial services firms engage with customers, and explain the upcoming changes, will be central to a successful roll out for the Consumer Duty. “It’s about plain English,” said Simoney Kyriakou. “It’s about seeing things from a consumer’s perspective. We all work in financial services, so we’re used to jargon – and we’re used to words meaning a different thing in regulated contexts – but the average layperson isn’t.”

Trust will also play a huge role in its success. “At the last couple of World Economic Forums, there’s been a bit of a running joke,” remarked Sam Seaton. “They say the new currency isn’t actually cryptocurrencies, it’s trust.” The Consumer Duty now opens up a window to build real trust with customers again, and to a whole higher level.

Moving beyond basic compliance

Whilst it seems most firms will be broadly ready for the implementation of the Consumer Duty at the end of July, there is much more they can do to really capture the spirit of the new regulation.

“What’s missing for me is probably the proactive engagement,” said Virk. “I’m not seeing that many firms looking at their data and analytics, and machine learning capabilities, to see how they can really understand their customers and their vulnerabilities, and then intervene and provide support. If you get your data right, you can create a single view of the customer, and over time you build a picture of their ambitions, their financial goals, and their circumstances. You can then identify when changes happen and trigger those interventions.”

“We’re starting to see those conversations about what the next evolution looks like,” added Anne Godbold. “Firms are asking about things like generative AI, and how they can use all of this unstructured data they’ve got to customise their approach and get to customers at the right time. Generative AI could, for example, enhance the notes taken in a contact centre, putting them into themes and categorising them to help better understand what the customer is doing.”

“I think firms should be looking at Open Banking in a way that helps them provide the automated insight that’s needed to inform ongoing product suitability,” said Sam Seaton.

“We recently analysed 3,000 instant savings accounts for an institution based on the data they provided. They had between £100 and £1.6 million in these savings accounts. And what was discovered, in milliseconds, with the algorithms running over these accounts was that 24% of people using them were only withdrawing money once every 350 days.”

“So they were using that instant savings account for an annual event, like a holiday or Christmas, which is probably not the purpose of such an account. Red flags there straight away. You take this data, multiply it by how many customers you’ve got, and you’ve instantly got an assessment of the issue that you need to think about solving.”

It’s reassuring to hear the confidence that those in our industry have when it comes to the Consumer Duty, and the customer-centric opportunities for growth it will lay out. It’s time to do our duty and help boost financial wellbeing amidst these tough times.