An opportunity to leverage the power of data

By Nelson Wootton, CEO and co-founder of SaaScada

The introduction of FCA’s Consumer Duty might be seen by many financial services (FS) players as another set of hoops to jump through, while donning their SM&CR bulletproof vest and KYC hat. But in this case, they are wrong. On the contrary, Consumer Duty challenges FS companies to go back to basics, focus on knowing their customers and giving them the best possible product. Something that should have happened from the start.

Now there’s a much stronger business case for putting the necessary work at the top of the development queue. But for financial services organizations to be able to do this, having a single customer view is essential.

The FCA has set a deadline of the end of October for companies to have sufficiently developed plans “to provide the companies’ governing bodies and the FCA with assurance that the expectations set out in the obligation have been carefully reviewed and will be implemented for new and existing products no later than July 31, 2023.” Time is running out to start implementing these plans and find the right partners to make it happen.

What does Consumer Duty mean for financial services?

Consumer Duty is designed to ensure that FS companies offer the most appropriate product to the customer. It obliges regulated companies and consumer organizations to take into account the needs, characteristics and objectives of their customers – including those with characteristics of vulnerability – and their behavior, at each stage of the customer journey. In addition to acting to deliver good results to customers, companies will need to understand and demonstrate whether those results are being achieved. The regulations cover:

  1. Products and services
  2. Price and value
  3. Consumer understanding
  4. Consumer Support

A big part of getting good results is in point 3 – understanding the consumer. Doing things well and that allows us to deliver on all the other points. With 9 months to fend for itself, this is where the power of data shows its worth – enabling businesses to use cross-product data to create a holistic picture of a customer.

Today, many banks and wealth managers may struggle to achieve this level of customer insight. Many of them are still operating under a product-centric heavy data model, they cannot create a complete view of a customer because the relevant information is siled. It takes time to compile customer information in this model due to fragmented data sets, but under Consumer Duty this will not be enough. Most vendors are data-swamps, the question is how do you dive into that data not only to gain a good understanding of the customer, but also to comply with regulations?

Unleash the value of data

Challenger banks were built with a structure that allows them to analyze and understand data for both customer information and regulatory reporting. But for established banks and wealth managers, many of whom have lived through the ringing bells of mergers and takeovers over the decades, the problem is more serious: legacy systems. The challenge is to bring siled data together in one place to allow the company to paint a cohesive picture of its customers.

Unraveling this legacy takes time, but to move forward and offer relevant products and services to their customers, financial institutions need to ensure that they are creating new offerings using the right technology. New services should be built on a data structure that provides real-time customer insights, while enabling agile development to deliver the best products and services to those customers. Otherwise, they risk failure.

Cloud-native core banking providers are the holy grail for financial services businesses that must comply with Consumer Duty, helping to revamp the way core banking services are delivered. This means that the process of developing new products and services is simplified and accelerated. This approach unlocks trapped customer value, mitigates risk, and generates real-time data insights.

Go beyond consumer duty

The FCA’s Consumer Duty requirements have proven what banks have always known, data is their most valuable asset. Insights from data are the only way for banks to get a single view of the customer. This is necessary to provide an accurate assessment of each user, prove that their products are right for them, and ensure that they help customers make good financial decisions. Without this level of visibility, companies could face FCA scrutiny or even fines for gross misconduct.

If financial services companies didn’t need even more reasons to make this change, they should consider it; By putting data at the heart of construction, companies can better understand their customers’ needs and use that information to create products and services that their customers don’t know they want. The availability of real-time data, when combined with broader industry insights, enables multi-factor analysis that helps predict trends and spot opportunities for business growth and protection.

In the current economic climate, this is even more important. Banks with the right data can gain real insights about their customers to inform innovative decisions and quickly launch solutions to help their customers navigate today’s economic climate. Failure to do so risks both falling foul of the FCA but also seeing customers move their banking elsewhere.