Tech and data firms in demand as new FCA rules loom

Finance firms are increasingly turning to tech and data insight companies in their quest to meet new Financial Conduct Authority Consumer Duty rules, aimed at setting higher standards of consumer protection, and forcing businesses to take a far more targeted approach when selling products and services.

The Consumer Duty, which goes further than the FCA’s Principle 6 of “A firm must pay due regard to the interests of its customers and treat them fairly”, was first announced in July and is likely to have major implications for financial marketing.

Under the new regime, consumers must only receive marketing communications they can understand, as well as only being offered products and services that meet their needs and offer fair value. They must also get the customer support they need, when they need it.

The new rules, which also include measures to ensure products and services are only marketed to people who can afford them, come into force in July 2023. However, companies must have set out their action plan by the end of this month, which needs signing off by the board or equivalent managing body.

At the time of launch, FCA executive director of consumers and competition Sheldon Mills said: “The current economic climate means it’s more important than ever that consumers are able to make good financial decisions. The financial services industry needs to give people the support and information they need and put their customers first.

“The Consumer Duty will lead to a major shift in financial services and will promote competition and growth based on high standards. As the Duty raises the bar for the firms we regulate, it will prevent harm from happening and will make it easier for us to act quickly and assertively when we spot new problems.”

According to new research from Moneyhub, conducted by Opinium, there is a significant knowledge gap across many firms; 38% of senior decision makers said they had either limited or no knowledge of the Consumer Duty legislation, with some only alerted to the legislation by the research, there were also signs that firms are getting their plans in place.

Some 22% of firms had projects in place in order to meet the deadline in 2023, and a further 28% are currently developing plans to become compliant.

For many of these firms, technology holds the key to Consumer Duty preparedness. Nearly half (48%) of firms plan to or are already investing in tech to develop and deliver more personalised and targeted communications. And 41% also have plans to invest in tech in order to access customer data and insights.

Importantly for FCA regulated companies, these regulations will eventually affect firms’ book of business rather than just new business. This in itself will prompt a re-evaluation of products that current customers are on and whether they are still appropriate.

Moneyhub CEO Samantha Seaton said: “There are no excuses left, businesses must ensure they understand their customer completely in order to offer products and services that fit their circumstances throughout the entire duration of their relationship.

“And the only way this is possible is with an ongoing holistic view of their customer’s financial universe. Open finance truly holds the key for firms to meet Consumer Duty. But to see open finance’s role as solely a solution to a problem is a mistake. It is also an opportunity.

“By better understanding your customer, it means you can offer super relevant, appropriate products and services, and ultimately create stronger relationships and build loyalty. Smart, forward looking businesses will seize this moment and reap the benefits of truly understanding their customer.”