Consumer Duty | Consumer Understanding | Part 1 of 5  💷😊

In a 5 part series, Grath examines how financial services organisations can leverage technology to deliver good customer outcomes. Furthermore, they can improve consumers’ financial well-being under the new consumer duty principle, in the context of the four outcomes: 

• Consumer understanding
• Products and services
• Price and value
• Consumer support

Part one: Consumer Understanding

Consumer Duty typically emphasises the need for financial institutions to act in the best interests of their customers. A good place to start is to ensure consumers are provided with easily accessible, clear and comprehensible information.

Here we consider how technology can be utilised to achieve these objectives and ensure firms’ adherence to the cross-cutting rules. Specifically when acting in good faith and avoiding foreseeable harm to retail customers.

Education & Awareness

Firms should consider developing interactive digital educational resources that explain complex financial products and concepts clearly to the consumer. Such services should be made accessible at the point of initial engagement, remaining effective throughout the customer journey via:

• Video
• Infographics
• Interactive Tutorials
• Chat Function

Firms can choose from an abundance of channels when developing consumer awareness across their portfolio of products and services. As a consumer, this enhances their understanding and acceptance of a firm’s product.

Personalised Communication

Firms should consider how existing and prospective customer relationship management systems help shape their conversations with their customer base. 

Customer data can be analysed to ensure consumers are interacting with products and services that meet their financial objectives. Analytical tools can also use customer data to identify patterns, preferences, and trends to provide personalised communication tailored to consumer needs and potential vulnerabilities. Typical data includes:

• Customer Profiles
• Risk Assessments
• Transactional History
• Risk Appetite preferences
• Previous interactions

The implementation of chatbots or virtual assistants can help answer customer queries in real time. This can help guide the consumer through financial scenarios and customised website content based on cookie data. In turn, helping to provide a personalised experience for each customer.

Online Simulation

The development and availability of online simulation tools can allow customers to model different financial decisions before financial commitment. This approach gives the consumer foresight into the potential outcomes of investment strategies.

Reviewing the consumer journey ensures customers can model the impact of their decisions with products and services, reducing the risk of potential harm and enhancing consumer understanding across all of the key customer lifecycle stages.

Interactive calculators and demonstrative sandbox environments help consumers understand the impacts of various factors such as interest rates, strategy, investment returns, and repayment terms.

Transparency through Technology

Customer lifecycle management can become straightforward and seamless, with an array of services accessible through self-serve features. Automating repetitive tasks such as data entry, query management, communication, administration of client terms and conditions and other such contractual administration allows firms to focus on value-add activity on behalf of their customer base.

Customers can monitor investment activity and performance on a demand-led basis in real-time with access to regular and easily understandable reports, detailing financial performance, risks, and potential areas for improvement.

Mobile Apps for Financial Literacy

Mobile applications that focus on financial literacy and empower customers to make informed decisions can cover basic financial concepts, such as; budgeting, saving, investing, and managing debt. Such applications incorporate features including expense tracking, budgeting tools and real-time notifications.

Keeping consumers actively engaged in managing their finances further reinforces the FCA principle based objectives. This can alert firms to their consumers who are in financial distress and can proactively mitigate harm from occurring.

User-Friendly Interfaces

Intuitive and user-friendly interfaces for online platforms and mobile apps to enhance the overall user experience are central to how technology can support consumers in meeting their financial goals and demonstrate how firms provide their services with their customers at the heart of everything they do, a key objective of the new principle.

By integrating these technology solutions, financial services firms can fulfil their consumer duty by ensuring that customers have a clear understanding of their financial products and transactions. Which not only enhances customer satisfaction but also builds trust and confidence in the financial services provided.

Over the course of this insight series, Grath will describe how our clients are operationalising and evidencing the new principle, embedding Consumer Duty within our GRC platform. 

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