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Consumer duty: can banks really become guardians of financial wellbeing?

In a time characterised by changing customer and regulatory expectations, the banking industry faces increasing challenges living up to higher standards – a potent example being the introduction later this month of the New Consumer Duty. In this article, we explore the limitations of old banks in meeting renewed expectations and discuss how new banks might overcome these obstacles to become true guardians of financial wellbeing.

On 31st July, the FCA New Consumer Duty regulations come into force which require financial firms to act to deliver good outcomes for retail customers. The rules require firms to act in good faith, avoid causing foreseeable harm and enable customers to pursue their financial objectives. This means considering the needs, characteristics and objectives of their customers and how they behave, at every stage of the customer journey. 

The regulations are mainly concerned with customer outcomes in relation to each financial product or service. But perhaps it is impossible to truly assess that outcome, without first understanding the overall financial situation of the customer. Without understanding whether the addition of each product or service, at the margin, is good, bad or best for overall financial wellbeing.

And if that understanding is what is ultimately needed to fulfil the intent of the regulation, is it reasonable to expect traditional banks to be able to do this?  Can banks realistically become guardians of financial wellbeing?


Traditional banks face significant challenges in assuming this new role. This is due to a combination of siloed product experiences, aversion to change and legacy systems. Characteristics that limit the structure, intent and ability to innovate at the core of large financial institutions.

Siloed product experience: Old banks have historically prioritised transactional relationships with customers, often neglecting the comprehensive financial relationship with individuals. Their product-centric approach can result in fragmented customer experiences, where financial advice and guidance are secondary to the primary goal of selling financial products.

Aversion to change: Long-standing banking institutions often struggle with cultural inertia and risk aversion, making it challenging for them to embrace disruptive ideas and novel approaches to serving customers. The fear of disrupting existing revenue streams and the adherence to conventional practices hinder the transformative potential of old banks.

Legacy systems: Established banks also grapple with legacy systems and outdated infrastructure, hindering their ability to swiftly adapt to evolving customer needs. The bureaucratic structures and complex processes inherent in traditional banks impede their agility in delivering innovative solutions and personalised experiences.


New banks, on the other hand, have the opportunity to overcome these obstacles. To assume the role of financial guardians by integrating customer experiences and combining new technologies with an agile mindset. 

Integrating customer experiences: Unlike their traditional counterparts, new firms can focus on delivering comprehensive financial solutions that cater to customers' wellbeing beyond transactional needs. By integrating financial management tools, just-in-time financial education, and tailored guidance into their service offerings, new banks can foster a holistic approach to financial wellbeing.

New technologies: New banks have the opportunity to leverage cutting-edge technologies such as artificial intelligence, behavioural science and open banking. These advancements can empower customers with real-time financial insights, customised recommendations, and intuitive digital interfaces that enhance their financial wellbeing.

Agile mindset: Unburdened by legacy systems and organisational inertia, new firms also have the advantage of starting with a customer-centric culture from the outset. Organised around self-steering, high performance teams, aligned by a shared mission and clear accountability. By leveraging an agile mindset, these banks can swiftly adapt to changing customer needs, offering personalised financial solutions and seamless experiences.

While the challenges of responding to changing expectations faced by old banks are significant, new banks have the potential to overcome these obstacles and thrive in a customer-centric, digitally-driven landscape. By embracing technological innovations, fostering agility, and providing holistic financial services, new banks can help customers make more confident decisions towards a better financial future. Establishing themselves as the true guardians of financial wellbeing. 

Guardian of financial wellbeing?

Comments: (1)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 24 July, 2023, 11:03Be the first to give this comment the thumbs up 0 likes

Regardless of the financial situation of the customer, higher interest rate on deposit will improve the customer's financial wellbeing.

OTOH, higher interest rate on deposit will degrade the bank's (or fintech's) financial wellbeing.

It's not only deposit interest rate.Take Right of Offset, which allows a bank to recover unpaid mortgage, auto loan, etc. from checking account / savings account / CD of the borrower if they're held at the same bank. Any bank that cares about customer's financial wellbeing will urge its customers to spread their banking products across different banks. But such an action would run counter to its self-interest to upsell and cross sell more products and increase "products per customer", which is a north star metric for banks.

Unlike any other industry that I can think of, banking (and fintech) industry has tons of conflicts of interest baked into its very charter.  

I totally agree with Matt Levine that "A bank with sleepy depositors would do well, a bank with antsy depositors would go bust, even if their investments were the same."

tl;dr: No, banks (or fintechs) cannot be guardians of customers' wellbeing.

For similar reasons, banks (and fintechs) can't be expected to spend too much time and effort on spreading financial literacy.

Jeremy Takle

Jeremy Takle

Founder and CEO


Member since

02 Dec 2022



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This post is from a series of posts in the group:

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