As the deadline for consumer duty implementation draws closer, the chief executive of Moneyhub Enterprise has said she suspects many firms have underestimated the changes that it will bring.
Speaking last week at a consumer duty webinar held by Open Banking Excellence, Samantha Seaton outlined why she believes consumer duty will be significant and transformative for consumers.
In Seaton’s view, the biggest change the regulation will bring will be around ensuring ongoing suitability for consumers.
“I think consumers will definitely see a difference. There are some firms out there who are very good, but I think what we have underestimated is the level of care that we’re going to need to give consumers," she said.
“My suspicion is even the best of us out there in the industry have not anticipated the level of intervention the FCA is expecting," Seaton added.
Seaton gave the example of a customer who is “slightly off-target” in terms of their retirement goals and asked whether financial advisers will give such a client an intervention.
”I don’t think we’re in the mode of proactive interventions and I think that’s the thing we will see in a few years time where we will all look back and realise the level of communication we get is in a different league," she said.
Firms are expected to have implemented the consumer duty by July 31 this year.
Research from Panacea published last month revealed that almost all (91.7 per cent) advisers said the Financial Conduct Authority’s consumer duty will increase the cost of running their businesses.
Only a quarter of respondents (25 per cent) said they were fully compliant with the duty as of yet.
Obligations
In Seaton’s view, the thing that most providers will really need to look out for is financial harm.
“You have all of these customers, and we know that people have between five and nine financial products in their lives at any one time," she said.
Seaton gave the example of a bank charging £15 a month for a consumer to use a current account that no longer serves their needs.
“If you’re only down by £10 or £15 a month on a few of these products, times that by 52mn people - that’s a huge amount of financial harm going on that we now have to stop," she said.
Seaton was joined on the panel by Salesforce's senior director, Aman Virk, Accenture's non-financial risk specialist, Anne Godbold and the FCA's manager payments policy, Helene Oger-Zaher. The session was moderated by FTAdviser editor Simoney Kyriakou.
Open banking and using data
Oger-Zaher linked the consumer duty with open banking, saying that when we think about what open banking is and the innovations that have come through “a lot of it is very aligned with what consumer duty is trying to do”.
She also stressed that getting the consumer duty right will help firms deepen trust with customers.
“Is it a big project? Yes. It is cross-cutting, it means it goes across all firms - forgetting open banking for a second - it goes across all firms that we regulate as the FCA. It’s about us being ready for implementation and supervising firms as we normally do," she said.
Seaton noted that the industry has to some extent put open banking to one side and it is seen as something it does not need to worry about.
“What we are underestimating at our peril is the amount of data that it informs and the insight it gives about customers," Seaton said.
“It’s almost like the heartland of our customer because we can see what people are doing fundamentally with their money.
“The conclusions you can draw informs you so well and this can all be automated,” Seaton said.
Seaton’s tip for firms is to look at open banking in a way that can provide the automated insights needed to inform ongoing suitability.
“You don’t need to be talking to your customer all the time,” she said.
Oger-Zaher agreed and noted there is a “real closeness in terms of spirit” between the two and a lot of relevance when you think about it from a technology perspective and how one can support the other.
The role of data and technology
Accenture's non-financial risk specialist, Anne Godbold noted that firms should act to use the data they have on customers to deliver on their consumer duty obligations.
"Firms do have a lot of data, but it doesn’t necessarily build in to delivering customer centricity. The traditional customer segments that we are used to is based on normal, simple demographic data - age, income, education. But how often does the bank really know what your financial objective is, what you are trying to do?," she asked.
“Now the FCA has been really clear, it’s talked a lot more about granular data and they’re really nudging firms to rethink this and making sure they really understand customer groups in a way that is useful. Thinking about the jobs to be done, what the objectives are and thinking about how do you help them at the right point in the journey," Godbold said.
In Godbold’s view, the innovation that will come from this is what is most exciting.
“To date most of our firms are really working on getting their backbone in place, using the data they’re got to monitor this. They haven’t yet gotten to the place where they’re implementing new data sources, that is to come," she said.
She gave the example of firms using generative AI to help them use the data they’ve got to respond better to customers, but noted that the cost of this may be prohibitive unless firms start to use the data they have got effectively.
jane.matthews@ft.com
