Consumer Duty and customer centricity in digital financial services.

Doing right by your customers will always deliver positive outcomes both for your customers and for you. It drives greater trust in your customers’ relationships with you and therefore greater loyalty. The UK’s Financial Conduct Authority (FCA) has announced new Consumer Duty rules that put the consumer at the center of every financial service industry decision. The laudable new principles are designed to drive a cultural shift toward increased customer-centricity by making companies:

• ask themselves what outcomes consumers should be able to expect from their products and services
• act to enable rather than hinder these outcomes
• assess the effectiveness of their actions.

The rules, released at the end of July 2022 (and expected to be implemented by August 2023), only apply to financial services firms operating in the UK. However, since the UK is a financial industry hub where global firms typically conduct business, these principles will have far-reaching implications.

What is the FCA’s Consumer Duty?

The FCA’s Consumer Duty is, as noted by KPMG, “designed to increase the current level of consumer protection in the retail financial services market.”

These measures are not simply rules being rolled out in one country, but rather a greater indicator of an industry shift that’s pushing the customer to the forefront of organizational operations. While implementing changes to adhere to these principles will not be easy, it is absolutely the right thing to do and companies will benefit from an increased level of consumer trust and loyalty in the long run.

Implications for digital experience.

More and more, consumers are comfortable with opening accounts online. While this is a positive trend for the industry, it also introduces some complications regarding adherence to these rules:

• If companies collect data from customers to help determine the best products and services to offer them, how can this process be made a simple, user-friendly experience?
• How do organizations ensure that customers are getting the education they need to make informed financial decisions?
• What friction needs to be removed from the digital experience and how can banks ensure that it’s been removed effectively?

Simplicity and speed of access to financial account details is now expected. The challenge these new regulations introduce is one of maintaining that simplicity, whilst incorporating additional steps of consumer duty. So, organizations need to be prepared to take a critical look at their digital experiences and how they continuously develop those experiences.

Knowing your customer.

KYC has been a long-standing part of the FSI landscape, but getting to know your customers well enough to confidently offer up products and services that are appropriate for them, could well require additional effort  at the beginning of the acquisition process. There may also be a need to more deeply understand what the customer is experiencing as they go through this process, and what changes could be made to simplify it. Being able to understand how  customers navigate these experiences, both individually and at scale, could provide invaluable insight into how to continuously improve them.

As you start asking customers to provide more details, there is a greater risk that customers will abandon their session. It will be more important than ever to create simple and intuitive digital experiences. Some things to consider include status bars so customers know where they are in the process, fun imagery/icons to keep things interesting and context so customers understand why they are being asked to provide specific information.

Educating customers.

The Consumer Duty rules emphasize that consumers need to be able to complete their intended actions as simply as possible. There is nothing more frustrating to a customer than running into hurdles when they are trying to do something like withdraw money from an account or close it. It’s their money, they should be able to manage it as they choose. The challenge with this is that some actions that customers want to take could have unintended negative consequences that the customer has to be made aware of. Such situations are particularly challenging to manage in the digital space.

In this case, it may be necessary to require customers to acknowledge that they’ve been informed of the potential negative consequences. However, once they’ve provided this acknowledgment, other roadblocks to completing the transaction should be removed. Make sure that every action you require a customer to do throughout their journey truly benefits the customer. If it doesn’t, edit it out. This customer-centric approach will be a good experience for your customers and will reflect positively on you.

Overall impression.

While adhering to the Consumer Duty rules will be no small task, it will improve the relationship between you and your customers. The new rules will inevitably include the need for financial services companies to experiment and see what works and what doesn’t. Continuously designing digital experiences is a big job that offers up risk if measurement and iteration isn’t done right, but massive reward if it is. Putting customers at the center of all of the digital design decisions you make and the experiences you offer will pay significant dividends over time.

Happy customers are loyal customers and advocates for your brand, driving organizations who truly embrace these principles to win in the market. It’s certainly an exciting time for the financial services industry and its customers, and we are eager to see how it continues to evolve.

Interested in learning more about the trend to customer centricity? Read the Harvard Business Review Analytic Services report on how organizations prioritize customer needs.