Conduct risk considerations for digital innovators

More than a quarter of all UK online spending is on financial services. Everything from taking out insurance to mortgages can now be done with the click of a button. Customers and businesses alike have embraced technology - but have firms embraced the existence of digital conduct risks to the same degree?

The FCA has yet to write specifically on the topic of digital conduct risk, instead reiterating its status as a ?channel agnostic? regulator. What this means is that online-only or tech-heavy firms are expected to be as vigilant when it comes to ensuring their customers receive good outcomes online as they are when they walk into a branch. 

Practical considerations for digital innovators

Digital products and services offer a great many opportunities for firms. For one, by guiding consumers through an online disclosure process, firms can 'test? customer understanding, providing reassurance to regulators.

Firms can also contact customers instantaneously through digital channels and update terms and conditions (T&Cs) at the same time, enhance speed of delivery and even 'see? through the eyes of customers, if appropriate tracking software is inserted into the process.

However, though there are efficiencies to be made, there are areas of high risk to contend with. Customers could, for example, simply click through T&Cs without reading them - something most of us will have been guilty of at some point. Though some firms may see passing on the responsibility of reading and understanding T&Cs to the customer as de-risking, lived behaviour suggests that this is not enough.

Digitally-savvy firms also need to be sure that digital delivery is appropriate and responsible. If you allow early access to a pension pot or immediate high-interest loans, you will need to be doubly sure that customers fully understand the consequences of their mouse clicks.

It may be necessary, in certain cases, to intervene if it appears customers have steered wrong - evidenced, for example, through the purchase of a product that was not initially suggested to them.

Finally, firms need to understand that vulnerability, disability and both financial and tech-literacy can all play a significant role in customer outcomes. Digital products and services need to be accessible to every section of the population.

Firms should consider using tech-based solutions to tech-based problems, something we cover in more detail in a recent white paper: Managing Digital Conduct Risk - Ensuring the delivery of fair outcomes. As customer journey-tracking and open data become more common, it is likely that many of the digital conduct risks that exist today could become a thing of the past.

Conduct and Culture Academy: 22 May - 26 June

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