Beyond Consumer Duty: Embracing True Customer Centricity in Banking

Andrew Stevens, Principle, Banking and Financial Services, Quadient

With the introduction of the new Consumer Duty, the FCA has set a new bar for how banks serve and interact with their customers.

While placing customer needs at the core of business strategies is admirable, it does not automatically equal success. As with any regulation intended to improve best practice, from food hygiene ratings to data privacy, there is a vast difference between doing the bare minimum to meet standards, and going above and beyond to provide exceptional service.

We are at the beginning of a journey towards ingrained customer-centricity, and those that can exceed expectations will quickly gain an advantage over their competitors.

The current state of consumer understanding and support

One key element of the new Consumer Duty is communication. There remains a significant gap between what consumers think they know and their actual comprehension of financial matters. For instance, recent research highlights a telling disparity: while 39% of consumers claim a high level of knowledge on financial matters, only 8% could fully grasp the intricacies of updated overdraft charges when tested. This underscores an urgent need for banks to not only disseminate information effectively, but also ensure it is relevant to and understandable by each individual.

In the midst of economic uncertainty, as consumers become increasingly constrained in their spending, clear and effective communication is paramount. Customers will be unlikely to forgive a bank they feel has given them inadequate, inaccurate, or incomprehensible advice. The current cost-of-living crisis has intensified the pressure on banks to provide support and advice. Yet consumers still struggle to receive the help they need when they need it. Whether this comes from an inability to contact the right person on a help line or chat window; or information arriving when it’s too late to do any good, or being filled with jargon. The consequences aren’t just a matter of customer inconvenience; they can impact financial well-being and ultimately consumer confidence in banks themselves.

Effective communication, therefore, is not just about the transmission of information. It’s about delivering the right message, at the right time, in the right language, over the right channel. Banks must find ways to present complex financial information in a manner that is easily digestible and that meets the diverse needs – and levels of understanding – of their customer base. By doing so, they can bridge the gap between their services and their customers’ expectations, leading to more informed financial decisions and enhanced trust in banking relationships.

Proactive vs. Reactive support in banking

The financial sector’s traditional approach to customer support has often been reactive – waiting for customers to reach out with their problems before providing assistance. However, the evolving financial landscape, especially in light of increasing economic pressures, is prompting a shift towards proactive support.

For instance, banks could use analytics to identify customers who might be at risk of financial hardship – such as those with frequent overdrafts or missed payments – and reach out with personalised advice or modified payment plans. Proactive support could also involve educating customers about changes in the financial landscape that could impact them, such as tax increases or the end of government support schemes like the Energy Bill Support Scheme. This type of engagement not only assists customers in managing their finances more effectively but also builds trust and loyalty.

The importance of personalisation and segmentation

In an era where generic solutions are increasingly ineffective, banks must embrace personalisation and segmentation. By analysing customer data, banks can identify individuals’ needs, tailoring their services and communications accordingly. For instance, does a customer always communicate via email, or WhatsApp? Do they have a high level of knowledge of saving options and interest rates, or are they a total newcomer? This strategy not only improves the relevance of the advice and products offered, but also enhances customer engagement and satisfaction.

For example, consider the different financial needs of a young digital native, versus a retired individual. The young person may naturally understand how to use internet banking and need no support on how to use an app. Whereas someone slightly older, who has registered for online banking the first time, may benefit from additional advice on how to navigate through the system and self-service.  By segmenting their customer base and personalising communications, banks can provide each of these groups with relevant and valuable information and services, rather than a one-size-fits-all approach.

Personalised communication is critical, and banks must use their customers’ preferred channels to ensure messages are read and, most importantly, understood.

Embracing continuous adaptation

With the new Consumer Duty deadline now in place for months, the focus is on ensuring an enduring commitment to compliance and adaptability. Banks must perpetually scrutinise and refine their practices in line with evolving customer needs. The ongoing obligation means that banks must continually evaluate their communications and other activity against customer expectations and adapt to changing economic scenarios. It involves not just meeting the letter of the regulation but also its spirit – acting in good faith and prioritising long-term customer education and support. As consumer expectations evolve, so must banks’ strategies to engage and assist their customers.

The new Consumer Duty might not start a revolution, but it is part of a process in banking: steering the sector into an era where customer welfare is paramount. However, true customer centricity is not a static goal but a continuous process. Banks must not only comply with the regulatory framework but also make sure they understand and are aligned with the shifting landscapes of customer expectations and needs. Through this sustained effort, banks can go beyond bare minimum regulatory compliance to forge deeper, more trusting relationships with their customers.


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