Using analytics to meet FCA Consumer Duty standards

Richard Bassett, VP Digital & Analytics, NICE International


Announced back in July 2022, the Financial Conduct Authority’s new Consumer Duty is now reaching its implementation. With fairness to consumers—especially vulnerable groups—at its core, the entire sector is under pressure to become compliant before the rules come into effect on July 31st, 2023.

Whether you maintain direct relationships with retail finance consumers or play a role in the design of financial products, this significant regulatory overhaul comes with detailed responsibilities that may require a comprehensive review of how you do business. Your regulatory status, reputation and ability to trade all depend on your compliance.

Embedding a measurable, reportable culture of fairness will take a new level of insight into your customers, vulnerability, and your processes for handling complex needs. And while agents have a vital role to play in how you serve your customers, technology like Artificial Intelligence and analytics is becoming fundamental to continued compliance.

A higher standard of consumer protection

The FCA’s new Consumer Duty rule was developed to embed a culture of fairness and openness in financial services businesses and the industry. Building on the FCA’s core purpose to protect consumers, the new Duty is focused on a single overarching principle: that firms ‘act to deliver good outcomes for retail customers.’

Of course, this seemingly simple expectation calls for a complex programme of change—and is supported by a range of more specific requirements.

Through three cross-cutting rules, the FCA articulates the new obligations for every regulated provider:

  1. Act in good faith towards retail customers
  2. Avoid causing foreseeable harm to retail customers
  3. Enable and support retail customers to pursue their financial objectives

The standards also include responsibilities against four key outcomes, describing the major elements of the relationship between a business and its customers:

  1. The governance of products and services
  2. Price and value
  3. Consumer understanding
  4. Consumer support

Four positive outcomes for consumers

Crucially, these new requirements are all focused on consumers and improving important outcomes including:

  • Fair value: Consumers receive fair prices and quality
  • Suitability and treatment: Consumers receive suitable products and good treatment
  • Confidence: Consumers have strong confidence and levels of participation in markets
  • Access: Diverse consumer needs are met

Fairness sits at the heart of all these outcomes, delivering honest, open relationships across every need, product, and type of consumer. Consistency will be key, not just in terms of agent training and performance, but also the technology that supports them.

The impact of AI and analytics on Consumer Duty compliance

As regulated firms align with the new Consumer Duty and the cross-cutting rules in particular, everyone involved in selling and supporting financial products will need to adapt. However, experts recognise the complexity of this task and the inevitability of a slow, gradual embedding.

This is where technology, artificial intelligence and analytics will have the biggest impact on compliance, accelerating the process of change by building a robust infrastructure, improving intelligence, and supporting agents and advisors.

#1 Understanding your consumers including vulnerable groups

While agents and advisors are a valuable way for financial services firms to understand the needs of consumers, some gaps and inaccuracies are inevitable. This is especially true when so many consumers rarely interact with agents and more people shift to digital channels.

AI and analytics can analyse every interaction, on every channel, understanding the sentiment of conversations as well as the content. This enables organisations to get a holistic view of how they align with Consumer Duty responsibilities, while uncovering compliance risks based on their data.

Analytics can also help with the delicate task of identifying vulnerable consumers—a significant part of embedding fairness and increasing access. The number of vulnerable consumers in the UK is increasing as a result of economic challenges and rising costs, but these consumers won’t always self-identify as vulnerable—or even speak to an advisor.

An AI-driven predictive model can automatically analyse and create a vulnerability score for every interaction, based on the FCA’s four drivers:

  1. Health
  2. Resilience
  3. Life events
  4. Capability

As a result, regulated firms can analyse every interaction based on these drivers, ensuring they deliver on fair outcomes mandated by the Consumer Duty.

#2 Supporting your frontline staff to act fairly

Integrated into your infrastructure, analytics can also give advisors and agents timely advice on acting in-line with the Consumer Duty. This includes interaction guidance and contextual recommendations on the most appropriate next actions for a given conversation. As your teams work to become more familiar with the requirements over time, this data-driven approach ensures they remain on track.

For supervisors and leaders, analytics can also inform effective coaching, assessing every interaction against the Consumer Duty and whether a good outcome was delivered. If not, you can automate remediation workflows by FCA driver and track resolution.

#3 Demonstrating and reporting on your compliance

Analytics can dramatically increase your visibility over your consumers, your agents, and how the two interact. Data-driven insights enable you to identify risks and compliance gaps sooner, then implement operational changes and monitor their impact.

A more holistic approach to data also supports you to demonstrate your compliance, surfacing relevant information for accurate, effortlessly produced reports. As a result, you can prove your ability to identify vulnerability, handle complaints, and deliver fairness at scale, throughout the entire customer journey.

Want to know more? Check out our Consumer Duty Compliance Intelligence Pack.

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