As the first quarter of 2023 draws to a close, Financial Services Institutions (FSIs) are one step closer to needing to demonstrate compliance with the Financial Conduct Authority’s (FCA) Consumer Duty. Coming into force for most FSIs on 31 July 2023 (or 30 April for manufacturers and investment businesses that produce, issue, design or build financial instruments), the new regulation is highly anticipated, yet still causing much confusion in the market.

The new Consumer Duty represents a more evidence-based assessment standard for good customer care in the financial sector. It comes at a crucial time, as consumers are feeling the effects of the cost-of-living squeeze. The latest UK Customer Satisfaction Index shows that a quarter of UK adults foresee their personal debt rising over the next six months and the majority (62 percent) expect companies to proactively support them with information and advice during this difficult time.

FSIs have a heightened responsibility to safeguard consumers in this environment, but with less than six months left on the clock, how they use the time ahead will be critical to their overall success. So, how can FSIs ensure they’ve interpreted all 11 sections of the regulation (with its 523 clauses and 133 actionable items) and applied them to their existing structures correctly?

Key priorities for organisations complying with Consumer Duty

Although applying the principles of the new Consumer Duty requires holistic thinking, there are some “hero” measures that FSIs should organise their strategies around. The following five questions should help them determine how ready they are to adopt the customer-centric thinking the FCA now necessitates.

So how prepared are you?

1. Does your organisation have a Consumer Duty Champion at board-level?

The whole premise of Consumer Duty is around introducing a culture of customer-centricity into an organisation. This doesn’t happen without strong leadership and without action from the top. As such, organisations should select their own “Consumer Duty Champion” – ideally someone senior with a seat on, or the ear of, the board, and who has an understanding of the importance of customer-centricity.

This individual should be responsible for establishing a task force, made up of multiple departments, that can address each of the 133 actionable items and ensure that these are reflected in the policies and the practices of the wider organisation.

2. Does your organisation define and identify customers with characteristics of vulnerability?

With the cost-of-living crisis showing no signs of abating, identifying vulnerable customers must be a key priority. Rather than relying solely on colleagues to identify when a customer is vulnerable and to appropriately tag them as such to other departments, FSIs must start leveraging natural language processing tools to automate this process.

The FCA categorises vulnerabilities on four key drivers: health, life events, resilience and capability. Tools can be implemented that use language-based rules to identify such vulnerabilities automatically, tag customer conversations based on the four key drivers, and send immediate real-time alerts to the appropriate team for further analysis and action. In addition, text analytics can be used to help FSIs to monitor vulnerable customers to see if they are routinely receiving poorer outcomes than other customer segments.

3. Does your organisation have effective methods in place to influence the right customer outcomes?

Ensuring that agents can use the right tools to access the right insight at the right time will help them to deliver a positive customer experience – and, crucially, better customer outcomes. When a colleague can view the customer in a holistic light and understand their present needs, they can advise customers appropriately. This is particularly important given the rising number of vulnerable customers. If they can only see a partial view of the customer then they risk not being able to make a thorough assessment of the situation, therefore leading to a poor outcome.

4. Is your organisation providing the same standards and capabilities to post-sale support as to pre-sale activities?

With a robust customer experience platform, FSIs can gather valuable insight on a number of metrics, including customer satisfaction, the effectiveness of issue resolution and other post-sale activities. These metrics, provided in context with customer feedback post-interaction, ensure that FSIs quickly identify issues, prioritise them based on impact and act on them.

Advanced segmentation capabilities and the ability to compare performance metrics – such as NPS – across both sides of the sales process help staff visualise if their organisation is providing a level of post-sale support that is commensurate to the level of pre-sales support offered to customers.

5. Is your organisation working together effectively with the entire distribution chain?

Breaking down departmental silos will be essential as organisations look to achieve positive customer outcomes. While the responsibility to manufacture products may rest with one department, with another team being responsible for selling and administering them, all must be calibrated to achieve the same positive customer outcomes. To effectively address this, organisations must focus on designing from the outside in, with the customer’s needs steering the approach.

Breaking down silos within a complex distribution model is no mean feat, and as such, gathering insights at scale across each and every channel in the chain is essential. Text or speech analytics can quickly surface key customer challenges here, and when combined with segmentation data from other CRM systems, can help compliance teams identify an issue and narrow it down to a particular segment of customers based on region, characteristics or other attributes, all within the span of a few minutes.

The art of the possible

With the 31 July compliance deadline looming, organisations’ success will depend, in large part, on their answers to the questions above. In the recent review of implementation plans, the FCA warned "if firms assume they can 'get by' largely with repackaging or supplementing existing data, then they risk not thinking deeply or afresh about the types and granularity of data that they will actually need to monitor and evidence outcomes under the duty effectively". But FSIs shouldn’t be blinded by the sheer scale of what’s required on paper. Rather, they should view the prospect of enacting change as an opportunity for greater customer-centricity. Indeed, this will separate the laggards – that view the new Consumer Duty as merely another box-ticking exercise – from the leaders that think beyond the regulation and see the art of the possible.