The Financial Conduct Authority’s Consumer Duty marks a turning point for retail financial services. Setting higher and clearer standards of consumer protection across financial services, this new regulation demands that firms “put their customers’ needs first”.
Affecting everyone from regulated firms (including those in the e-money and payments sector), through to industry groups, trade bodies, experts and think tanks, this policy comes into force from July 2023.
From July, firms will be required to “act to deliver good customer outcomes”, whilst also providing evidence that these outcomes are being met. This includes considering the needs, characteristics and objectives of customers – including those with characteristics of vulnerability – and how they behave, “at every stage of the customer journey”.
These outcomes relate to:
- Products and services
- Price and value
- Consumer understanding
- Consumer support
Specifically, the FCA requires financial services companies to:
- Provide products and services that are designed to meet customers’ needs, that they provide fair value, that help customers achieve their financial objectives and which do not cause them harm. Companies don’t have to make good investments that have performed badly but they must ensure that everything they do is geared towards a favourable result for customers.
- Communicate and engage with customers so that they can make effective, timely and properly informed decisions about financial products and services and can take responsibility for their actions and decisions. Consumer Duty is all about deeds rather than empty promises about ‘caring for our customers’.
- Consistently consider the needs of their customers, and how they behave, at every stage of the product/service lifecycle.
- Ensure that the interests of their customers are central to their culture and purpose and embedded throughout the organisation.
What does the FCA Consumer Duty mean practically for those affected, and how can businesses best prepare themselves for its rollout?
- True Omnichannel
- Build an Engaged Workforce and Strong Service-Centric Leadership
- Digital-First Service
- Leverage Analytics and Insights
True Omnichannel
Under this new regulation it’s never been more important to deliver a seamless (and contextual) customer experience.
Whilst the financial services industry has adopted new channels, there are significant challenges when it comes to integrating and aligning processes and platforms, often resulting in data siloes. If organisations are to create a frictionless customer experience and leverage historic interaction data and contextual information, they will need to embrace a fully omnichannel approach to their service strategy.
Not having to re-explain issues when moving between channels is now in the top 3 issue for 52% of respondents in the ContactBabel Inner Circle Guide to Self-Service
Build an Engaged Workforce and Strong Service-Centric Leadership
Fulfilling the Consumer Duty will require significant cultural change to be embedded throughout the business. Ensuring that the interests of customers are central to purpose is no easy task.
Research from The Institute of Customer Service suggests that ensuring that there is customer service experience in the boardroom, and setting clear accountability for service with specific objectives and incentives will help to promote a sustained commitment to customer service.
Skills shortages and recruitment challenges mean that the imperative to train and develop employees has become even more critical to customer satisfaction and business performance. For organisations to effectively fulfil the Consumer Duty requirements, service-centric values and behaviours will need to be consistent throughout the entire organisation, from the top down.
The companies that lead the way in customer service have buy-in at every level of the business, with leadership taking an active role in monitoring performance and impact. In many cases, compensation of senior executives is directly tied to customer satisfaction – meaning these businesses are 7.7 times more likely to strongly agree they have senior leaders who immerse themselves in customer service, and 9.2 times more likely to report their senior leaders view customer service metrics on a daily basis. (Zendesk CX Trends 2022).
Digital-First Service
Many customers have heightened expectations surrounding digital customer experiences alongside the desire for a real human connection, especially for complex or sensitive issues.
Modern customer behaviour is being shaped by the proliferation of digital service channels and the demographic is slowly shifting towards the digital natives. Delivering a consistent, personalised experience to customers across all touchpoints requires service centres to have full visibility of interaction history and information. Stripping out information siloes and connecting front and back office departments to surface relevant information and meet customer needs at every stage of the product/service lifecycle will enable organisations to put their customers at the heart of the business.
Digitally savvy leadership and the right combination of technology and processes can help financial services companies to provide 24/7, personalised service across customer channels of choice, delivering value across every interaction.
The new regulation isn’t the only driver for the adoption of a digital-first service strategy - McKinsey found that service organisations that use technology to revamp the customer experience can reduce cost to serve by 20% to 40% and boost conversion rates and growth by 20%. Digital customer service experiences don’t just lead to more satisfied customers, but also a better bottom line.
Leverage Analytics and Insights
Gathering feedback in real-time and understanding customer behaviours, challenges and desires will enable organisations to respond in the most helpful and relevant way. Effective insight and analytics capability will enable leaders to parse information and prioritise actions to shape more effective service and power future decision making.
In the context of the coming regulations, this means that tools to drive understanding of Voice of the Customer (VoC) and those designed to deliver better visibility into performance like Sentiment, Speech, Text and Voice Analytics platforms will become increasingly important. Leveraging real-time customer feedback and implementing responsive strategies and approaches will help financial services organisations to capture, visualise, report on and analyse customer data automatically and in real-time.
The new Consumer Duty promises to be one of the biggest shake-ups in retail financial services regulation. For some, this will require a significant shift in approaches and processes surrounding how they interact with customers.
If you want to know how Route 101 can help you to bridge the gaps in your service strategies and ensure your systems are set up for success, book a free, no obligation discovery session now.
