The UK's Financial Conduct authority has fired a shot across the bows of firms preparing for new Consumer Duty rules, warning that some are falling behind in their preparation and are failing to address a shortfall in their technology resources.
The Duty comes into force in six months, requiring banks and other financial institutions to drastically improve their consumer protection efforts. In preparation, the FCA has published a review of how firm are planning to implement the changes, finding that many have established extensive programmes to comply with it properly.
However, others have fallen behind in their planning: "We recognise plans were likely to be high level given the early stage at which we reviewed them," says the FCA.
"Nevertheless, we saw some plans that suggested firms may have considered the requirements superficially or are over-confident that their existing policies and processes will be adequate.
"We urge firms to carefully consider the substantive requirements of the duty, as set out in our final rules and guidance. Firms should ensure that, when they are reviewing their products and services, communications and customer journeys, they identify and make the changes needed to meet the new standards."
The review notes that some plans "noted a shortfall in budget or technology resource but without setting out plans for addressing this".
The watchdog also warns that "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".
Nelson Wootton, CEO of vendor SaaScada, says: "Any firm who assumes they can ‘get by’ on Consumer Duty compliance with their existing data is burying their head in the sand so deeply they’ll end up in Australia. Financial services organisations are being asked to achieve an unprecedented level of visibility, with granular real time insights into customer spending and outcomes so that they can understand customer needs, assess their financial health, and make recommendations effectively.
"This means completely re-architecting how core banking services are delivered, using cloud and automation to bring together data points and build an effective picture of every customer, to prove they are being served well by their products."