By James McGarva, Managing Director of Business Information, Experian
At a time when households and businesses are under increasing financial strain, the Consumer Duty which comes into force on July 31, is a welcome development in the UK’s regulatory landscape. It sets a new higher standard for the UK’s financial services sector to ensure products and services are delivering good outcomes for consumers and small businesses.
Experian research shows that most businesses (58%) view the Consumer Duty as a positive force that will help protect both. This suggests it could even be a competitive differentiator for those that embrace and use it to help build greater trust in the financial services sector. While there may be some lingering uncertainty about how the Duty will impact businesses over the longer term, organisations should look at the Consumer Duty as an opportunity to strengthen their processes and relationships with customers, rather than treating it as a compliance obligation.
Ways businesses can prepare
A multi-disciplinary approach is crucial to tackle the Consumer Duty effectively. If small businesses operating in the financial services sector view it merely as a compliance exercise, they risk overlooking the opportunity to enhance the overall customer experience and management across their business. It is imperative that they take a holistic view across marketing to product, analytics, data, and customer support, and assess how each of these aspects of their business play a part in the process.
At the core of the Consumer Duty’s principles lies a deep understanding of customers, with data playing a pivotal role in this process. Businesses that neglect to update or modernise their data processes run the risk of alienating specific customer groups, particularly those from lower socio-economic backgrounds or those with additional support needs.
By using similar data insights, businesses can bridge gaps and ensure that no demographic is excluded from benefiting from their products or services.
Bridging the vulnerability gap is also a crucial aspect that the FCA seeks to address. The FCA expects firms to enhance their support for vulnerable customers. An essential challenge for organisations is to identify signs of vulnerability at all customer touchpoints and adapt communications to cater to their support needs. To make your business more inclusive, consider how accessible your services are for the visually impaired, deaf, and other groups who may experience difficulties.
Data and the customer
Lastly, checking data quality is vital, businesses need to ensure they’re geared to maintain accurate data that can support the Duty’s four core objectives involving products and services, price and value, consumer understanding and consumer support. There is an especially growing requirement to identify customers facing financial difficulties and tailor support accordingly. Firms should proactively engage in this aspect to meet the objectives of the Consumer Duty effectively. This means using data more efficiently to identify and manage customer touchpoints to ensure the specific needs of individuals are met.
Consumer Duty shouldn’t be seen as a burden but rather as an opportunity to improve overall customer experience, and establish themselves as trustworthy and customer-centric enterprises. By embracing the Consumer Duty and implementing any necessary changes, businesses can not only comply with the regulations but also build longer lasting relationships with their customers, which will undoubtedly lead to long-term success in the ever-evolving economic landscape.