Widespread misconduct. Poor cultures driving profit chasing at the expense of customer outcomes. Massive regulatory backlash resulting in large remediation projects. Is history repeating itself?
In Australia, the financial sector is going through a period of substantial change as the banking royal commission investigates misconduct on an industrial scale reminiscent of what the UK experienced ten years ago in the wake of the financial crisis. As well as providing a parallel to the findings in Australia’s finance industry, this also offers a promising glimpse of what could follow, including a new drive to embrace pioneering AI technology to support customers.
Off the back of the global financial crisis, UK financial organisations found themselves under much greater scrutiny from the Financial Conduct Authority. A host of issues were brought to light: irresponsible lending, mis-selling of products, poor product design, undue focus on commercial success to the detriment of good customer outcomes and inadequate checking mechanisms to protect customers.
From major retail banks to small scale financial advisers, regulated firms were given clear instruction to improve their performance and culture or face the consequences as the industry sought to restore trust, improve transparency and drive better outcomes for customers.
Easier said than done
Much like with the Australian market, UK organisations found themselves facing two major challenges. Firstly, how to change internal performance and culture to become more customer-focused moving forward and secondly, how to review past activity to detect instances of non-compliance and appropriately compensate those customers who have been treated unfairly as a result.
A core part of the issue is the sheer mountain of data which needs to be processed. In Australia, the big four banks record around 15 million minutes of customer calls each month. Trying to review these is traditionally a manual process: someone has to physically trawl through the conversation recordings as well as any written communications to audit the files.
The process is so time consuming that firms struggle to review them at scale, with most major organisations only able to analyse 1 – 5% of their total calls. This leaves an unacceptable blind spot, which hinders any organisation in their quest for transparency.
New solutions to old problems
Regulatory reviews typically involve a range of subjective decisions: whether a customer has been mistreated or not is ultimately a judgement that a human needs to make. However, around 90% of an analyst’s time will be spent manually sorting through records, which is a task that can now be automated.
New innovations are emerging to help tackle the issue. One such provider, Recordsure, develops pioneering analytics and automation tools for financial firms which can perform chores like this on behalf of analysts, thus freeing up time for them to spend on tasks which actually require their high skill-set whilst enabling them to make better decisions based on stronger intelligence.
The software uses machine learning technology to interpret conversations and text in the same way that a human would and can spot complex themes such as references to a given topic or behavioural traits suggesting that a customer might be displaying signs of vulnerability. It can also identify anomalous patterns within a conversation like due diligence which has been discussed for less time than one would expect or did not contain key expected terminology.
Technologies like this are having a revolutionary impact and enabling organisations to review 100% of their customer interactions instead of having to rely on small-scale random sampling. Banks are now able to intelligently channel extra resources to areas in need of the extra support to reduce conduct risk and better serve their customers.
Recently back from a trade mission to Australia aiming to help build awareness around regtech innovations and the impact they are having in the UK market, Recordsure founder and CEO Joanne Smith was positive about the growing enthusiasm from Australian institutions: “the overwhelming message I have been getting is the need for change, and the acceptance that throwing more people at the problems won’t solve them: technology is needed to reform the system. The really encouraging thing is the determination business leaders are showing in addressing the root cause of the issues rather than papering over the cracks: it’s good news for consumers and the industry as a whole.”