Going beyond compliance on Consumer Duty
By Robert McKechnie, Director of Consumer Products at Equifax UK
Steve Jobs famously believed good customer service is to offer consumers what they want or need, before they realise they want or need it.
But as many financial services businesses have proved in recent years, this is easier said than done. Fortunately, when the Financial Conduct Authority (FCA) announced the final rules for its new Consumer Duty last year, it was encouraging to see much of its sentiment was already consistent with our data-driven approach to understanding and supporting customers on their financial journeys. We simply hadn’t put that specific label on it yet.
The new rules around Consumer Duty set higher and clearer standards for consumer protection across financial services and require firms to put their clients’ needs first. The change goes beyond Treating Customers Fairly, because it embeds a new principle to act to deliver good - not just fair - outcomes.
This is supported by three high level cross-cutting rules: act in good faith, avoid causing foreseeable harm, and enable and support retail customers to pursue their financial goals. This means delivering better outcomes across consumer understanding, price and value, products and services, and consumer support.
Powering good outcomes
For many Equifax partners which harness our data-driven solutions, it’s likely they’re already a step ahead and will have been putting into practice the values behind Consumer Duty for some time. Nonetheless, consumer protection is more critical than ever.
According to the regulator’s Financial Lives Survey almost 13 million UK adults had low financial resilience this time last year. Meanwhile, rising inflation and the cost-of-living crisis continues to pile pressure on affordability and tip more of us into financial difficulty. It was vital therefore that as users of big data we have been concentrating on the real-world solutions we can put into force, to help clients better support their customers, while at the same time meeting the demands of rising regulation.
The power of Open Banking technology and the spirit of its application has much in common with Consumer Duty. Equifax is already supporting hundreds of clients in the UK with solutions that power more timely, accurate lending decisions based on behavioural banking data that can improve affordability assessments. The extra level of real-time insight Open Banking offers is vital to lender confidence. For consumers, this means simultaneously protecting them against irresponsible lending when it could lead to bad outcomes, while also helping to improve financial inclusion.
But this is only part of the picture when it comes to supporting customers and the financially vulnerable. Last year, Equifax partnered with PrinSix to support KCOM in creating the UK’s first internet service provider accepting applications for a social tariff online, verifying individuals’ receipt of Universal Credit. Our ongoing partnership with Canopy and its RentTracking platform is paving the way for 4.5 million tenant households in Britain to build their credit files and democratise access to affordable credit. Meanwhile we continue to raise awareness and educate consumers and businesses around problem debt, financial stress-points and responsible debt collection.
Keeping ahead of the market
However, Consumer Duty can’t lead to a new inertia. It’s critical to stay ahead of the market rather than merely copying it, and this means listening to customers, taking intelligence from sales teams, and continuously developing solutions that meet actual consumer needs. It means going beyond compliance. To help lenders keep ahead of regulatory requirements, we’re working on a new score to identify indebtedness.
We’re a step in the financial journey, and only part of the final answer, but the transparency we help provide is key to protecting consumers. Data has power, and analytics consultancy helps clients to ensure data is used to maximum effect – whether that’s person or device ID and verification, affordability for lending or pricing, fraud protection and more.
The gold standard
Good practice in consumer protection doesn’t happen overnight. Instead, it comes from a deep and embedded understanding of customers’ financial lives. It also comes from a ‘top down’ culture – and the good practices financial services professionals must live day in and day out.
The new Consumer Duty means it’s critical we evidence existing good processes, which includes many things, not least a greater risk aversion than our competitors. In this sense the principles of Consumer Duty – to act to deliver good outcomes for retail customers – are our daily practice.
Turns out, the new gold standard is already a major part of what we do.