Consumer Duty — An opportunity for financial services firms to lead through a customer-centric approach
Zone’s Financial Services Solutions Lead, Tanveer Qureshee, outlines our point of view to help financial services firms approach FCA’s Consumer Duty regulation with confidence and drive a competitive edge by excelling in customer-centricity.
This is part 1 of a 3 part series, unpacking the 3 key themes from our in-depth point of view on Consumer Duty.
Consumer Duty is one of the most noteworthy regulations issued by the UK Financial Conduct Authority (FCA) to ensure consumer protection in the financial services market. Customers will need to be front and centre of decisions to an extent not seen before. The implications for financial firms will be significant, and the social context of the cost-of-living crisis in a post-Covid world means how people use their money is even more important to them. Firms must rethink their relationships with customers to stay ahead.
The Duty’s implications for financial services firms
The Duty is driven by a consumer principle that requires financial services firms to act to deliver good outcomes for retail consumers. There are four rules for compliance — requiring firms to ensure consumers receive communications they can understand, products and services that meet their needs and offer fair value, and the support they need, when they need it.
As a result of this regulation, firms will need to not just take the necessary steps to ensure these outcomes but also evidence that the outcomes are being met. Some of the challenges facing them are:
1. Potential for penalisation of firms and their senior management
2. Impending deadlines are close
3. Lack of standard benchmark for what ‘good’ looks like
These challenges put the need for a solid approach in even sharper focus.
An opportunity for transformative change
The regulation will of course prompt firms to make changes to their products and services to ensure that they are meeting the outcomes. However, we believe it also presents a significant opportunity for transforming businesses to be customer-centric.
To help firms who need to plan and act on Consumer Duty, Zone have created a point of view that provides guidance and a practical approach that shows firms what it means to truly excel in customer-centricity. It is based on our research that brings together viewpoints from firms and their customers as well as a wealth of experience from our practitioners, strategists and financial services domain experts.
Our point of view is underpinned by three key themes:
1. Tailored relationships with customers drive exceptional experiences
2. Employees are the power for setting the quality of customer relationships
3. Customer insights are now a must-have
We believe that these elements capture what it takes to embrace the underlying principles of the Duty. Let’s explore the first theme and unpick what strong relationships really mean, and how firms can achieve them.
Customer Relationships — the driving force for exceptional experiences
We believe that listening to customer needs and motivations throughout the lifecycle is a powerful tool for relationship building. To help firms that are keen to embrace customer-centricity and strengthen their relationship with their customers, we have distilled our learnings into four key takeaways for firms. These are the headlines for a successful approach, which we detail further in the Zone’s Consumer Duty point of view link here.
1. Trust, engagement and knowledge are essential to creating an outcome-based model
These components provide a framework for firms to act in good faith; support customer objectives and avoid foreseeable harm — as well as create strong relationships.
2. A firm’s relationship with a customer is throughout the end-to-end journey
Firms that take a holistic end-to-end view and work to dissolve silos will benefit from increased agility, operational efficiency and resilience. In the scramble to improve digital touchpoints, other channels such as branches and contact centres must not be neglected.
3. Firms need to think about how well they understand their customers Consistent, in-depth research will help build accurate customer profiles. This must be coupled with a strong user-testing program to ensure that products and services are understood by the target market. Firms should be aware that customers can move in and out of vulnerable circumstances at any point.
4. Customer insights are needed to deliver on customer-centric content
Firms should apply a forensic lens to the content they’re using and the tone of voice. Having a user-centered content design approach will ensure users are given the content they need, at the time they need it and in the format they expect.
How to apply our learnings to a strategic approach for ensuring compliance
To deliver on the outcomes required by the Duty, firms require an approach that is underpinned by data gathering and analysis to help evidence that these outcomes are being met. This can be done by introducing the right measurements along the way to enable firms to collect data and customer insights proactively throughout the lifecycle of a product or service and act on them effectively.
Zone have designed an approach that can help. At the heart of this is our own Consumer Duty assessment framework that firms can apply to scrutinise their entire product and service lifecycle. This will produce a comprehensive heatmap that shows a firm’s specific challenges and opportunities for ensuring the outcomes of the Duty are complied with, with equal focus on the customer and employee experience.
Armed with this knowledge, the opportunities that provide most value and progress on the compliance journey can be prioritised and delivered. This is done through Minimum Viable Product (MVP) solutions that can be placed in the hands of live users, as soon as possible.
If you would like to get further insights on The Duty and our assessment framework, don’t forget to download the Zone’s Consumer Duty point of view here.
