The Financial Conduct Authority’s (FCA) final rules and guidance for a new Consumer Duty will set higher and clearer standards of consumer protection across financial services and require firms to put their customers’ needs first. The breadth of the requirements means changes have been made by financial services providers enterprise wide. More personalized journeys, processes and decisions now take centre stage as customer needs, characteristics and vulnerabilities become key actionable insights. This provides the potential to significantly enhance competitiveness within the banking and financial services sector, with the implementation of the regulations anticipated to introduce key changes in pricing, additional charges, and overall market dynamics.
By emphasizing the importance of fair value outcomes, the regulations are set to influence pricing strategies and the levying of charges at various stages of the customer lifecycle. This will foster a more competitive environment, likely exerting downward pressure on loan pricing and upward pressure on savings rates. Banking and financial organizations are expected to carefully assess their market positioning and aim to strategically manage their market share in response to these evolving dynamics.
Moreover, the regulations will further underscore the alignment of good outcomes, customer satisfaction, and corporate reputation throughout the customer lifecycle.
We expect to see foundational changes made in how banks manage data and use analytics, including AI. The ability to ingest more types of data is key, as is the breaking down of product silos to get a fuller picture of each customer. AI and machine learning models will help lenders analyse much more data from different sources to get a better picture of customer needs and vulnerabilities.
An essential aspect of the new regulatory framework is the establishment of a robust feedback loop and adaptability measures. As such, ongoing monitoring and testing will play a crucial role. The availability of comprehensive outcome data will enable banks to identify areas of improvement, as well as potential issues requiring remediation. Streamlining this process and ensuring easy access to relevant data will be pivotal in maintaining agility and staying on par with industry standards. Flexibility in decision-making, communication strategies, and customer-centric channels will become critical factors in achieving a competitive edge.
As consumer duty regulations come into effect, the changes that firms have been implementing will undoubtedly create a more competitive environment. Those with the technologies that make it easy to leverage disparate customer characteristic, event and outcome data sources, and which support flexibility and optimisation of product pricing, customer decisioning and treatments, will clearly emerge as leaders.
FICO Platform revolutionizes how organizations make decisions and apply intelligence across the customer lifecycle. It provides an open architecture and an integrated set of composable capabilities that span the applied intelligence value chain — from organizing data, to discovering deep new insights, putting this into motion with actions to achieve the desired outcomes.
Peter Lemon, FICO Consultant