Continuing our Consumer Duty insight series, in part 2, Grath considers how firms can appropriately apply technology to the “four outcomes” and, in particular, how the product and service outcome can benefit from technology solutions.
Part two: Products & Services
Consumer Duty requires products and services for consumers to be fit for purpose. The FCA requires them to be designed to meet consumer needs. Consideration of the characteristics and objectives of any customer and how those customers access those products and services is part of that design process.
The FCA has aligned the new rules concerning the design, approval, marketing, and ongoing management of products and services throughout their lifecycle with existing product governance requirements, specifically across the PROD sourcebook.
Here, we consider how technology can be used by firms to achieve this outcome and ensure firms’ adherence to the cross-cutting rules, specifically when acting in good faith and avoiding foreseeable harm to retail customers:
Product Governance
By digitising product governance, firms can effectively build, administer and monitor a range of financial products and services against their specific regulatory environment, ensuring product documentation is up to date, with areas of non-compliance identified and resolved promptly. A single, centralised platform allows all relevant stakeholders to collaborate and share information, strengthening the governance and oversight of product life cycles. Owners of specific business lines can use such platforms to report customer product feedback, allowing firms to be responsive to customer needs.
Digitising and centralising this process at the outset of a newly conceived product or service increases the likelihood of the result being fit for purpose. Centralisation is the key to a balanced organisational culture with features more likely to deliver products the consumer needs.
As a result of good culture and a centralised approach to product governance, the risk of “foreseeable harm” is reduced. Robust governance ensures that products and services meet consumer needs and financial objectives, resulting in good outcomes. A data-driven approach allows firms to identify potential harm before it becomes actual.
Regulatory adherence is a crucial concern at the inception of a product or service and should be considered from the outset. The regulator expects product compliance to be treated with the same level of importance as commercial factors and be integrated into the governance process. Technology can support and evidence that the design process has been followed, including regulatory reviews, and that governance responsibilities have been completed throughout the entire product lifecycle, from idea generation to implementation.
Personalisation
The FCA expects firms to apply the cross-cutting rules across their target markets and identify foreseeable harms. A target market requires a consumer-focused approach to ensure the right products and services are offered to the right consumers to meet their needs.
Personalisation, enabled through technology, has its part to play in this respect and can enable firms to make bespoke products and services based on customer needs. A bespoke approach enhances the overall customer experience and increases customer satisfaction. Firms can leverage technology to develop customisable interfaces and applications, providing customers with personalised dashboards, alerts, and notifications tailored to their financial objectives and preferences.
Communication, Feedback, and Innovation
Firms should leverage structured feedback through technology-enabled communication channels such as review platforms, chatbots, social media, and surveys to innovate products further. Regular testing of communication allows firms to understand preferences in customer interaction and identify potential harms that may occur through breakdowns in communication. CRM systems can integrate feedback mechanisms, allowing firms to track and manage customer interactions and opinions around products offered.
Customer lifecycle surveys are relatively easy to implement across customer-facing platforms and systems, allowing businesses to understand any friction within the customer journey and overall product experience. This information is invaluable for refining products, enhancing services, and building more robust, enduring customer relationships.
Vulnerability
Aligned with personalisation is the need for firms to consider their customers’ needs, characteristics, and objectives – including those with characteristics of vulnerability – and how they behave at every stage of the customer journey.
From a technology perspective, products and services should be designed with accessibility in mind, ensuring that individuals within firms can use their target market with consideration to a range of differing abilities. This includes considerations for people with visual, auditory, motor, and cognitive challenges.
Personalisation plays a vital part in this respect, with the ability to tailor and customise experiences based on vulnerability factors. Personalised settings and options can support customers in adapting a product or service to suit individual requirements better, reducing the risk of feeling overwhelmed or misunderstood.
Technology should also be used as a means of identifying vulnerable customers or those who are experiencing a period of vulnerability, allowing the firm to take steps to support customers in need. Real-time monitoring and analysis of customer data and behaviour can identify patterns indicative of vulnerability. Unusual spending patterns, changes in transaction frequency, or deviations from typical behaviour could all be financial distress signals. Historical data can be used to understand, define, and identify vulnerable customers within the firm’s target market. Digital platforms allow client feedback to be prompted within the consumer journey to identify concerns or challenges that may indicate vulnerability.
Conclusion
To conclude, technology can be harnessed by firms to meet the requirements of the products and services outcome. The capture, analysis, and application of customer feedback is integral to this process and should be used to innovate firm offerings and, where possible, be tailored to consumer expectations.
A well-designed, personalised consumer experience targeted at the intended market will result in better consumer outcomes.
How Grath Can Help
In this 5-part series, Grath identifies how firms can apply technology solutions to the four outcomes. In part 5, Grath will identify where firms are struggling to evidence and monitor their efforts with consumer duty and investigate how mapping Prin2A through our GRC solution is one way to tackle issues faced.
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