As the UK’s financial regulator, the Financial Conduct Authority (FCA) has announced new standards to protect consumers from this rising financial uncertainty and complexity, Consumer Duty. However, the duty has raised expectations of financial firms to provide services that are benefit-focused for consumers.
In this article, we look at the key rules and guidelines firms will have to follow, and the impact they will have on the industry, to help financial firms develop a strategic plan to prepare for Consumer Duty.
Consumer Duty is a new list of standards set by the FCA that aims to deliver improved outcomes and protections for retail customers. It is a continuation of their Treating Customers Fairly (TCF) mandate that sought to protect consumers from unfair treatment and ensure firms act responsibly on their behalf. Consumer Duty aims to take TCF a step further by setting higher and clearer standards of consumer protection whilst requiring firms to actively prove that their processes result in better outcomes for consumers.
Consumer Duty was announced as a result of consumers facing increased financial pressures from the raised cost of living and other factors. Because of this, they are having to make complex decisions in an increasingly complicated environment. It is the responsibility of firms to support these consumers by informing and supporting them to make decisions that lead to positive outcomes. Unfortunately, firms can fail to provide this level of support and give their consumers misleading or ineffective information. Consumer Duty seeks to shift this consumer-firm relationship to one that ensures a positive outcome for consumers whilst protecting them from emerging harms.
The main impact of Consumer Duty on financial firms is the shift to self-compliance to prove they are meeting its benefit-focused standards. Under TCF guidelines, regulators like the FCA would be responsible for compliance checks to ensure customers were treated fairly.
Now, firms must assess customer data at every level of their organisational structure to ensure they are in line with the rules and standards of Consumer Duty. They need to implement features like realtime notifications and granular levels of MI to monitor and assess performance, ensuring the best outcomes for the consumers with whom they transact.
Not only is this time and resource-consuming, but many of these firms will have to restructure or replace their customer management systems/platforms to integrate various compliance checks. Because of this, the FCA provided firms with 12 months to meet the new standards before Consumer Duty comes into effect, along with a set of deadlines to meet.
The new series of outcome-focused standards set by Consumer Duty demands firms to make considerable changes to their organisational structure. One of the key challenges involved is the integration of customer and performance analysis to ensure they are meeting the standards of the Duty. To overcome this, firms need a solution that can seamlessly integrate with existing financial systems and optimise the overall process, which is exactly what Bonafidee provides.
Bonafidee’s ID verification and advanced e-signature tools place safety and compliance as a priority. It also allows organisations to configure a customer journey that is accessible to everyone. We understand that one size doesn't always fit all, and therefore allow users to identify themselves by providing a range of ID verification methods. Enabling an individual to complete a user journey in a single session, by providing choice, benefits both the consumer and organisation. As a result, firms can effectively support their customers with a platform that ensures compliance and helps them meet and surpass the standards of Consumer Duty.