Is Adhering To The FCAs Latest Consumer Duty Unattainable Without The Help Of Technology?


Many shoppers are suffering at once with high inflation and rates of interest.

Now, while that is simple to say and observe, it’s often hard to quantify what which means, in practice, and the way many shoppers are being materially affected.

Nevertheless, over the past couple of years, Financial Conduct Authority (FCA) here within the UK has been tracking consumer financial vulnerability.

Their research found that in May 2022, nearly 13 million or 24% of all UK adults had what they term ‘low financial resilience’, which they describe as being in a state where in the event that they suffered a sudden change of their personal financial circumstances, then they might struggle to pay their domestic bills and meet their credit commitments.

Alarmingly, this number has increased by over 2 million adults since their February 2020 Financial Lives survey.

This just isn’t surprising, given the results of the pandemic and the numerous increases that we now have seen in the price of living over the course of 2021, 2022 and thru into this 12 months.

But, these numbers only account for those customers which can be financially vulnerable. If we have in mind the FCA’s 4 drivers of vulnerability (poor health, recent negative life events, financial resilience and low capability), then the variety of vulnerable UK adults rises to just about 25 million or 47% of the adult population.

That’s an enormous number.

In response to this and what’s being labelled as “one of the biggest-ever shake-ups of consumer finance in the UK”, the FCA is introducing on the thirty first July of this 12 months latest rules and guidance (Consumer Duty) for banks, constructing societies, insurers, investment firms, and plenty of other businesses that fall under its purview.

These rules would require firms to act to deliver good outcomes for retail customers covering services and products, price and value, customer understanding and customer support.

Furthermore, the FCA’s latest rules will “require firms to contemplate the needs, characteristics and objectives of their customers – including those with characteristics of vulnerability – and the way they behave, at every stage of the client journey. In addition to acting to deliver good customer outcomes, firms will need to grasp and evidence whether those outcomes are being met.”

So, what does that mean for purchasers?

Well, let’s say, for instance, a customer wants to modify to a latest product but faces a big exit fee in the event that they accomplish that. That fee would now fall foul of the FCA’s latest rules.

Or, for instance, let’s say a customer desires to cancel a product but is told that to do they must physically go right into a branch. That requirement would now also breach the FCA’s latest rules.

As well as, customers may also complain in the event that they think they’ve not been fairly treated under the brand new rules. And, if the FCA finds that there was unfair treatment or risk of harm to a customer, then the offending firm can expect robust motion in the shape of interventions, investigations or possible disciplinary sanctions.

It’s not yet clear what those interventions or sanctions may appear to be, but to offer some context, the FCA has levied nearly GBP1.5 billion ($1.87 billion) in fines over the past five years, with the biggest wonderful for one single organization being in excess of GBP260 million ($324 million).

But, it’s not only the client’s responsibility to indicate where they could have been mistreated. The FCA may also require firms to observe and report on customer outcomes.

Now, in case you consider the variety of interactions (calls, emails and messages etc) that a bank or other financial service institution can have with their customers on a each day, weekly or monthly basis, then monitoring and assessing all of those interactions is an enormous job.

I spoke to Darren Rushworth, President of NICE International, to higher understand what this implies for financial service organisations.

He told me that traditionally when latest regulations come into place, firms often depend on employees, consultancies or suppliers, employing lots of of individuals, to undergo all of their calls to evaluate whether or not they have adhered to the rules or not and if any remedial motion must be taken.

That could be a very costly exercise, which, in itself, is usually an actual disincentive against any meaningful change with some firms often happier to pay fines quite than make any changes to the way in which they do business.

But, in terms of the brand new FCA regulations, Rushworth believes things are different and that “It’s actually going to be very, very difficult for organizations to implement these regulations, especially when it’s those that are involved in deciding whether something is compliant or non-compliant.”

He illustrated this using an example of a UK insurance firm who, counting on their very own practices and best efforts, were only in a position to discover 20% of the shoppers who could be considered vulnerable in accordance with the FCA’s latest consumer duty of care.

In response to those changing requirements, NICE have developed and built into their Enlighten AI analytics platform a series of analytical models which have been trained and tuned specifically to analyse and highlight interactions with vulnerable customers.

This permits them to mechanically rating and classify every interaction, higher understand where motion must be taken to make sure compliance, provide real-time guidance for agents when coping with customers and uncover underlying product, process or skill-based issues which can be drivers of vulnerability and complaints.

The previously cited insurance company have recently implemented NICE’s Enlighten AI for Vulnerable Customers analytics solution and, over the course of just a couple of weeks, they’ve increased their ability to discover vulnerable customers from 20% to 80%. Furthermore, that number is improving all the time, they usually at the moment are only deploying human beings now to take a look at probably the most serious cases.

The moral of the story, in accordance with Rushworth, is that “treating your consumers with a good and reasonable duty of care is unimaginable to do with any level of confidence without technology.”


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