Firms that view the Financial Conduct Authority’s (FCA) Consumer Duty legislation as ‘just another FCA tick box project’ are missing its point, warns Moneyhub after its research highlights an ‘alarming’ lack of preparedness.
The open finance platform’s ‘FCA Consumer Duty: Business Burden or Golden Opportunity?‘ report, conducted by research agency Opinium, reveals a ‘significant lack of knowledge’ surrounding the FCA’s ‘Consumer Duty’. Thirty-eight per cent of senior decision-makers claim to have either very limited or no knowledge of this upcoming legislation.
The new FCA Duty, which sets “higher and clearer standards of consumer protection across financial services, and requires firms to put their customers’ needs first”, comes into place at the end of October 2022. Applicable firms need to provide an agreed implementation plan to comply with the new rules by 31 July 2023.
Moneyhub’s report found that 22 per cent of the surveyed firms already had projects in place to meet the deadline in 2023. It also found that a further 28 per cent are currently developing plans to become compliant, which hope to be completed and submitted by the end of the month.
As outlined by the FCA in July, the new Consumer Duty aims to stop rip-off charges and fees; make it as easy to switch or cancel products as it was to take them out in the first place and provide products and services that are right for their customers. The legislation also aims to stop key information only being included in lengthy terms and conditions, making it more easily accessible to consumers.
Technology is key
Among the businesses and firms that were aware of the new regulations, 23 per cent said that they plan to invest £5million or more to make the most of the opportunity. For many of these, the key outgoing seems to be an investment in new technology to better manage their data and to comply with the FCA in time for the final 2023 deadline.
Forty-eight per cent of firms planned to or have already invested in technology to develop and deliver more personalised and targeted communications. While 41 per cent also have plans to invest in technology in order to access customer data and insights.
Samantha Seaton, CEO of Moneyhub, explained the importance of finding a solution to comply with the Consumer Duty: “There are no excuses left, businesses must ensure they understand their customer completely in order to offer products and services that fit their circumstances throughout the entire duration of their relationship.
“And the only way this is possible is with an ongoing holistic view of their customer’s financial universe. Open finance truly holds the key for firms to meet Consumer Duty. But to see open finance’s role as solely a solution to a problem is a mistake. It is also an opportunity.
“By better understanding your customer, it means you can offer super relevant, appropriate products and services, and ultimately create stronger relationships and build loyalty. Smart, forward-looking businesses will seize this moment and reap the benefits of truly understanding their customer.”