A year ago, the Financial Conduct Authority (FCA) introduced the Consumer Duty standards, a set of rules which aimed to improve and increase consumer protection for the financial sector. These required banks and other financial services firms to prioritise their customers and offer them products and services with transparency and fairness. Failure to do so could result in hefty fines but also reputational damage.

With this first anniversary of Consumer Duty, it’s important to reflect back on the standards, the challenges that financial services have faced and to look ahead at what to expect in the next 12 months. 

Consumer Duty shaking up the industry

There are concrete signs of how the financial services sector’s response to Consumer Duty has led to some significantly positive outcomes. 

Customer service-related processes that were previously partially or fully looked over have risen up the agenda for firms. For example, banks now ensure they are passing on interest rate changes as quick as possible especially when it comes to savings products, something that was previously easy to overlook – or shall we say delay – to increase profits. 

Since the standards have been implemented, there has been regulatory outreach targeted to the wealth industry specifically focused on the automatic charging mechanisms that existed for charging fees. This was sometimes resulting in automatic charging when services had not been provided. This has ensured companies review these processes and put checks and balances in place. This is clearly an improvement in customer fairness, a key part of the legislation.

Consumer Duty has helped enhance communication between regulators and financial services. The two parties now engage in more wide ranging dialogues discussing challenges, what works and what doesn’t and actions needed and underway to rectify. Not only that, but more people within financial firms including their boards are consciously considering standards, products and services provided to customers and are more keenly focused on proactively supporting change to ensure everything is efficiently and timely addressed. They make sure there is clarity, communication and fairness in their offerings while also correcting systemic problems that might be spotted in complaints.

Barriers in complying with the Consumer Duty standards

While the Consumer Duty rules have ignited further collaboration and consumer centricity, firms still face several challenges in implementing the measurements. Some of the main struggles include the collection of customer data and the development of the reports demonstrating compliance. Firms need to ensure they build their reports using accurate information which is sometimes hard to detect especially if the process in assessing such information is done manually. 

In addition to accuracy, the speed and agility in which firms gather or update the data and then the process or product itself play a critical role in ensuring not only the reports are completed successfully but the change is effectively undertaken. This can prove tricky to achieve if the right tools are not incorporated within the process. 

Being able to analyse and report on the information firms have in an accurate and swift manner is critical to avoid scrutiny and potential fines. Not only that, but failure to show compliance with the standards could sabotage a firm’s reputation with its clients and shareholders.

Leveraging technology for accurate reporting

It’s likely that customer data will sit across various platforms, often be product not customer centric and be in different formats, making the identification of the right information difficult to achieve manually. As a result, firms are now relying on technology to ensure they avoid errors or misinformation being included into the reports. Specifically, the use of AI tools has simplified and automated the process guaranteeing the quick and efficient collection of data. The ability to effectively ‘chat with your data’ using generative AI is a real game changer to improve interrogation and understanding. It also gives firms back precious time to concentrate on more pressing matters.

Along with improving the reporting process, technology is becoming more sophisticated and connected allowing firms to retrieve unique insights and better understand their customers. Technology enables regulatory compliance, enhances innovation and product development while also adding an extra layer of customer trust.

The road ahead

Over the past year, Consumer Duty has transformed the industry by implementing a set of rules to not only improve customer experience and trust but also enhance the financial services sector as a whole. Moving forward, we should be expecting to see more positive changes from the industry as a result of the Duty. To keep up with the requirements though, firms should embrace technology, invest in the right solutions as well as partner with reliable third parties to support them in their journey.