A quiet revolution has been taking place at the Financial Conduct Authority (FCA). It’s called Consumer Duty. 

In a campaign to become (in its own words) more ‘assertive and data-led’, the UK regulator has launched Consumer Duty - a set of rules and principles that 60,000 UK financial services companies will be required to follow to ‘fundamentally improve how firms serve consumers’. From implementing easier-to-understand communications and eliminating ‘rip off’ fees to ensuring enhanced governance and accountability, Consumer Duty requires firms to “act to deliver good outcomes for retail customers”.

These rules, which were unveiled over the summer and come into effect next May, have the potential to have a profoundly positive impact on UK financial services. 

There are many ways this is an important moment for UK financial services. From my point of view, this is an opportunity to focus on one: the positive, transformative impact Consumer Duty should stand to have on the millions of immigrants who have made the UK their home, and the 800,000 additional newcomers who add themselves to this community each year. 

Tucked in amongst the various categories of ‘financially excluded’ people, immigrants to the UK are a would-be attractive, creditworthy, credit hungry community of individuals that have been hiding in plain sight for too long. 

Millions of people cross borders every year, establishing lives in new countries to work, study or be with family. As happens in every country in the world, when a person immigrates into the UK, he or she does so leaving behind years - or even decades - of credit history. For them, the prospect of a borderless financial services system in which they can transport their financial data from their home credit bureau to a lender, regardless of either’s location, remains a pipedream. 

The impact of this ‘credit invisibility’ is substantial. Without access to these people’s past credit histories, lenders have no choice but to automatically decline their applications for new finance. The only feasible alternative is to assume the applicants are much riskier than they often really are, and offer access only to high cost credit products or provide the most restricted credit limits. 

This all collides, meaning newcomers to the UK are routinely excluded from the most basic financial services that many people take for granted, and lenders are prevented from serving them. Whatever these people’s backgrounds, qualifications, incomes or savings, fairly priced credit cards, phone contracts, car loans are all out of reach to hundreds of thousands of newcomers every year in the UK alone.  

Consumer Duty has the power to bring the needs of these newcomers to the fore, ensuring that all consumers, regardless of where they originate from in the world, have faster, easier, smarter access to competitive financial products and services in the UK. 

It isn’t just financial inclusion that Consumer Duty solves for in this way. For lenders, Consumer Duty also makes good commercial sense. 

By supporting more newcomers who arrive in the UK to work or study, often for many years, financial services companies that embrace the spirit of Consumer Duty and focus on real and diverse needs stand to benefit from tapping into this deep market of potential consumers and creating brand loyalty within it.

Looking again at the UK immigrant population highlights this point perfectly. Of the 10 million immigrants living in the UK today, 3.5 million are relative newcomers who have little or no UK credit history but who could be categorised as ‘creditworthy’, if only they were able to provide access to their historic credit data to their prospective credit providers.  

These 3.5 million people, it should be noted, make up more than 5% of the total UK population. The attractiveness of this untapped market goes further still: by 2035, 100% of annual net population growth is forecast to come from immigrants. Solving financial inclusion for these individuals is not only essential for their own financial wellbeing, but for all lenders who need continuous access to new market streams in order to grow.

Consumer Duty can serve as a timely reminder of the UK financial system’s responsibility to protect and do the best for its retail customers. Consumer Duty is the Regulator's common sense response to ensure UK financial services providers really focus on putting the customer first. The Duty can usher in a new way retail financial services operate - advocating more proactivity by businesses in the way they both observe and interpret regulation. 

But when we look at the potential impact on a consumer category as vast and underserved as UK immigrants, we can see how the Duty has the potential to mean more than better adherence to regulation. It demonstrates instead that it really can be possible to build a more inclusive financial services system, while bolstering and supporting service providers’ commercially-minded market development strategies. 

Consumer Duty isn’t just a bellwether for change, but also a reason to look positively at the future of UK financial services. Particularly in this current market, when everything else looks bleak, the Consumer Duty revolution stands to be a fruitful, positive one that we’re excited to see. 

This is for general information only and this content does not constitute regulatory advice or information. Nova Credit UK is currently seeking authorisation with the Financial Conduct Authority in the UK.