Consumer Duty vs. TCF: what's the difference & what do you need to know?

The complexity of the competitive market has made the purchasing environment for consumers increasingly difficult; with so many payment plans, subscription services and product brands, it can be challenging for consumers to decide on the right one for them. In light of this, the FCA established the TCF (Treating Customers Fairly) mandate back in 2006, to ensure financial firms support their customers in making educated financial decisions. 

Now, the FCA is raising the bar in customer protection with the upcoming introduction of Consumer Duty. It represents a transition to providing customers with benefit-focused outcomes, rather than simply supporting them through their journey. But what are the main differences between the FCA’s mandates, and how does Consumer Duty demand more of financial firms? 

What is the FCA’s Treat Customers Fairly mandate?

The principle of TCF is to ensure firms put the customer at the heart of their processes by providing clear information, communication and ensuring products meet their requirements. It sought to create an environment where “consumers can be confident that they are dealing with firms where fair treatment is central to the corporate culture.” 

TCF states six clear outcomes that firms need to produce to ensure the fair treatment of their customers: 

1. Consumer confidence that they are being treated fairly. 
2. Products and services meet the needs of the targeted customer group. 
3. Consumers are appropriately informed on the product/service before, during and after the sale via clear communications. 
4. The advice consumers receive is suitable to their specific group, circumstances and requirements. 
5. Products and services must meet the perceived performance they have led consumers to expect. 
6. Consumers are protected from unreasonable post-sale barriers that try to convince them to change product, provider or submit a claim or complaint. 

The FCA themselves monitor the industry implementation of TCF via their risk-assessment ARROW process (Advanced Risk Responsive Operating Framework). Firms must demonstrate to FCA regulators that they have incorporated systems and structures that produce the desired outcomes throughout the customer journey. If they are deemed at risk of treating customers unfairly, FCA provides training and guidance to mitigate it. If there is a proven breach of TCF principles, firms can face regulatory action and financial fines as a result. 

What are the differences in the upcoming Consumer Duty? 

Benefit 

The main focus of the upcoming Consumer Duty is to put an emphasis on the outcomes for consumers. Rather than firms demonstrating that their customers are treated fairly in line with TCF, the Duty takes it a step further by ensuring that customers experience benefit-focused outcomes. These benefits are in relation to the product, customer experience, and post-purchase support. 

As a tool to optimise the guidance of their customers, financial firms can use adaptive customer-centric technology to capture and record the customer journey from initial consent to benefit-focused outcome. They can then configure and improve this journey from feedback and data, optimising it in real-time and in full transparency with the customer. 

Responsibility

One of the major differences between TCF and consumer duty lies in the level of responsibility. Instead of demonstrating to the FCA that they have systems in place to treat their customers fairly, financial firms will need to provide data of customer outcomes that directly benefit them. The Duty focuses on areas of consumer understanding, the price and value of products, and customer support to help avoid foreseeable financial harm. 

To better manage the new responsibilities demanded of the Duty, financial firms can utilise secure digital platforms that optimise time-consuming processes. These firms can then onboard and monitor customers in real time using the data captured and demonstrate consumer confidence. 

Compliance 

As a result of the emphasis on responsibility, the Duty also exhibits changes to compliance standards. Financial firms will need to provide FCA regulators with customer data and statistics that prove they have delivered the outcomes in accordance with the new standards. As a result, they will need to regularly monitor and assess data throughout the customer journey related to each outcome, and ensure they are consistent throughout. 

Best-in-class digital platforms provide financial firms with full automation and integration at each stage of their customer journey. Via real-time monitoring and integrated Machine Learning (ML), firms can automatically monitor and assess customers to provide regulators with proof of compliance. Moreover, it provides an improved perspective of the customer journey as a whole, along with ways to optimise it. 

Prepare for Consumer Duty with Bonafidee

Where there are similarities between the TCF and the Duty, there are clear adjustments financial firms will need to make to be compliant with the upcoming standards. Ensuring customers have benefit-focused outcomes not only demands greater visibility of the customer journey, but also requires optimising existing processes to ensure their deliverability.

Bonafidee’s platform represents a holistic gateway for financial firms to monitor, assess and enhance the customer journey. Organisations can offer dynamic user journeys that are accessible to everyone whilst automating tasks that help eliminate customer abandonment. Bonafidee provides firms with the confidence to adapt to the Duty’s standards and fully support their customers. To learn more about the demands of consumer duty and how Bonafidee can help you meet them, download our latest whitepaper.

Learn more about preparing for Consumer Duty with resources from Bonafidee.