Many firms still haven’t had the opportunity to drill down on the implications that the Consumer Duty has on their business. A recent webinar outlines the key steps to take.
What is this article about? What businesses should know about how to embed the Consumer Duty into their products and services, as well as entrench it in the company culture beyond the mere compliance requirements.
Why is it important? Companies only have until July 2023 to become compliant with the Consumer Duty, which affects all products and services sold to consumers.
What’s next? The Financial Conduct Authority will begin enforcement action against non-compliant companies after the July 2023 deadline.
The Financial Conduct Authority (FCA) keeps reiterating to businesses that the Consumer Duty rules are a win-win for all parties. With a deadline of July 2023 to comply with the rules, many businesses are firmly focused on integrating the measures into their business strategy.
Christopher Woolard CBE, a partner at EY, describes the Consumer Duty rules as one of the biggest changes to the UK financial services regulation. He adds that one of the most prominent issues that brought about the duty was the perceived failure of businesses to place consumers at the heart of the business.
“The Consumer Duty was then designed in an attempt for business owners to put themselves in the customers’ shoes and put the consumers at the centre at every step of their product design,” Woolard explains while speaking at The Payments Association’s webinar on the rules.
The goal is to achieve a seamless transition devoid of any form of friction or disruption, but some businesses are struggling.
The FCA states that the duty will require “all companies to put their customers’ needs first, whether designing, selling or advertising”.
The rules apply to all FCA-regulated firms such as consumer credit, investment and insurance companies, micro-enterprises and small charities, including non-payment companies with connected services, explains Savoie.
However, Max Savoie, a partner at Sidley Austin and member of Project Regulator, warns that the rules “can apply to unregulated services offered by regulated companies, and it can also apply to a company even if it only offers B2B services”.
The wide-reaching implications of the rules means not all companies have begun assessing the impact or implementing changes to comply.
Savoie explains that there is no one-size-fits-all template for embedding the Consumer Duty into a business because it depends on what kind of business a firm does and its role in the value chain. Businesses should, therefore, focus on what could cause problems at the end of the chain or where pricing and other factors could go awry for customers.
To help businesses, a whitepaper published by The Payments Association deals extensively with how to embed the Consumer Duty.
Melissa Corkhill, the UK head of risk and compliance at Modulr, says that the Consumer Duty rule is more effective when “embedded into the fabric of the organisation”, adding that the quickest way for companies to do that is to gain a detailed understanding of their customers and assess business risks, their role in the distribution chain and the impact on responsibilities with co-manufacturer agreements.
Woolard’s advice to businesses to adapt quickly and easily to the rules is to look inwards at what’s already in practice. Does the business have a process improvement initiative or an initiative for customer data quality improvement? Once this is established, the business should then work on implementing it from the Consumer Duty lens.
Technology programs, especially those that gather customer data and information, will play a big role in making the Consumer Duty a part of everyday business life. However, Woolard believes achieving this will not happen instantaneously and is more likely to be a two- or three-year journey.
Nevertheless, from customer feedback surveys to data analysis and visualisation, businesses should work hard to keep track of their performance results. It will help to build evidence-based performance metrics that companies can use to track progress and feedback. Finding specific data points from the collected data will help find process failures before they get worse and identify areas of strength and weakness in the system.
Being customer-centric will allow a business to take a more coherent and holistic view from end-to-end across all business functions that can positively influence a customer’s outcome. Because of this, companies must focus on the customer at every stage of product development and in their overall business strategy. Fail to do this and the FCA may be knocking on your door.
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