The opinions expressed here are those of the authors. They do not necessarily reflect the views or positions of UK Finance or its members.

Consumer Duty as a competitive advantage

We see the Duty as being as a competitive advantage, as a strong and trusted relationship between consumers and firms is likely to lead to higher customer retention and an enhanced reputation. It is therefore not surprising that other jurisdictions, such as the US, Australia, and Singapore, are observing the implementation and results of the UK’s new regulations closely. During a CUBE webinar a key point raised by compliance and financial experts was the focus on consumer outcomes.

The circumstances of a customer can change within a short period of time, as we have seen with the Covid-19 aftermath and cost of living crisis. What provided a good outcome for them one day may not be applicable a year after. This is a particular concern for customers “who may be more marginalised and maybe not have the same socioeconomic support system designed to meet their needs,” as stated in the webinar by the US-based expert, Sylvia Yarbough, Regulatory Consultant and Former Head of Compliance.

The other element of this challenge is that not all vulnerable characteristics are obvious, and the data would be considered sensitive from a storage and retention viewpoint. The FCA Consumer Duty is a fundamentally different approach to the US, however positive results from the Duty are likely to increase the international interest in it.

Firms need to find Champions

The Duty expects firms to appoint a Consumer Duty Champion. This Consumer Duty Champion, “is a well thought out move by the regulator to ensure that [the Consumer Duty] really is embedded by making sure that the voice is heard within the firm, that there is someone calling that out and has that responsibility” Linda Gibson, Head of Regulatory Change at BNY Mellon’s Pershing said during the webinar. The requirements of firms to comply with the Duty will not only affect the compliance departments but will require the support from human resources, marketing, and other departments to ensure compliance. For some firms, this means a culture shift for the entire business in favour of their customers. 

Another challenge identified during the CUBE webinar is that of acquiring and analysing the right types of data. Firms need to capture data to help them measure customer outcomes. Existing complaints data does not go far enough. One of the principles of the Duty is to foresee harm. It requires firms to be proactive, which in turn will lead to fewer complaints and avoids a negative reputation for the firm.

Regulators around the globe are watching, while the ongoing process of implementing and using the Consumer Duty is being tested.

More from CUBE on the Consumer Duty