Consumer Duty will place significant, possibly expensive and, let’s be honest, pretty onerous responsibility on any regulated product provider in financial services.
“Firms would be expected to 'put themselves in their customers’ shoes’ when considering whether their communications equip consumers with the right information, at the right time, to assess products or services and their value and make effective decisions in their interests” - FCA Consultation (CP21/13 4.1)
The Duty is made up of an overarching principle and rules that firms will have to follow. It sets higher and clearer standards of consumer protection across financial services. It also sets expectations that can work with new products or ways of working as business models change or develop and it better protects consumers from current or emerging drivers of harm.
At Moneyhub, we also believe it is a huge opportunity for financial services firms to redefine their relationship with their customers. This will result in more profitable, lower risk and incredibly customer-centric businesses and, more importantly, better off customers.
A significant shift
According to our research:
Over 50% of FCA regulated firms are not prepared for incoming Consumer Duty regulation
75% of firms agree that the new Consumer Duty regulations will have a major or moderate impact on their way of doing business
Consumer Duty creates a number of challenges for firms:
The Products & Services Outcome: Firms must ensure that products are designed and distributed in a way that meets the ongoing needs, characteristics and objectives of a target group of customers.
The Price & Value Outcome: Manufacturers will be required to carry out regular value assessments of their products to ensure that consumers are receiving fair value for the price. Firms must consider the benefits and limitations of a product, expected price to be paid and any characteristics of vulnerability or suitability of their market that will impact fair value.
The Consumer Understanding Outcome: The FCA expects firms to test their communications to see how well they are understood. Firms must support and enable consumers to make informed decisions about their products and services.
The Consumer Support Outcome: Firms must provide an adequate level of support to meet customer needs throughout the lifetime of the relationship. This includes easy access to customer service across an appropriate range of channels, ensuring customers don’t face unnecessary barriers should they want to switch products, make a complaint or access benefits and putting processes in place to effectively deal with incidents such as security or fraud concerns.
Data powered solutions - it’s all about the ‘ilities’
Moneyhub’s open data platform provides access to Aggregated, Categorised transaction data including current accounts, cards, savings, loans, mortgages, pensions and investments to power processes and dashboards that identify vulnerability & capability, affordability, suitability or eligibility.
The same data can help firms understand their customers’ needs, characteristics and behaviours including how and why customers use (or fail to use) financial services. When combined with our Personal Financial Manager, it can identify real time changes in consumers’ circumstances, such as a change in employment, increasing exposure to debt or inability to bear loss at both a market and 1-to-1 level.
Combine that with the ability to nudge consumers at the right time and in context and one can see why Open Banking and Open Finance data should be central to firms’ compliance with Consumer Duty.
Examples of the benefits of Open Finance
More accurate, comprehensive and lower cost fact finding processes
More efficient digital onboarding processes including KYC checks
Gap analysis and both initial and ongoing suitability checks including changes in capacity for loss
Highly personalised customer experiences, supporting customer communication and retention
Improved decision-making by providing a holistic picture, for example, small pension pots may be considered for trivial commutation but when viewed in aggregate (and, potentially, consolidated) the importance and value for retirement planning is more obvious
Leveraging data for better outcomes including using rent recognition to improve credit scores and enabling access to mortgages and other loan products
Lower cost and frictionless payment mechanisms including automated sweeps to savings and investment products, pensions or protection or loan repayments etc.
From product outcomes to customer outcomes
Many firms claim to have millions of customers when in reality they’ve just sold a lot of products. In a complex, competitive, confusing world Moneyhub helps turn transactional buyers into loyal, engaged customers. When clarity and confidence about what your customers really need and want is in short supply, Moneyhub gives you the tools you need to comply with the Consumer Duty AND deepen relationships with customers, increase share of wallet and grow your business.