Introduced in July 2023, the Financial Conduct Authority’s (FCA) Consumer Duty, also known as the Duty, has been in force for over a year. The Duty, which set “higher standards of consumer protection across financial services” also set out requirements for businesses to deliver simple, quick and reliable communications for their customers while providing evidence that their products deliver good outcomes.
One of the most impactful regulations introduced as part of the Duty was the requirement for organisations to deliver helpful and responsive customer service, to make it “as easy to use a product or service, sort out a problem, or switch or cancel, as it was to buy in the first place”. Jo Causon, CEO of The Institute of Customer Service, praised the holistic approach of the Duty, avoiding the ‘league table’ approach and focusing instead on the outcomes for the customer. However, the financial industries mentioned in the latest UK Customer Satisfaction Index (UKCSI), released by the Institute of Customer Service, showed little to no improvement in their scores year-on-year, with scores for both Insurance and Banks & Building Societies sectors decreasing slightly in the twelve months since the introduction of Consumer Duty.
With an increasing number of in-person bank branches closing, as well as rising numbers of vulnerable customers, it is imperative that financial services understand and apply the Duty in order to remain compliant.
Is twelve months too soon to fairly evaluate the impact of Consumer Duty on customer experience (CX) in the financial sector, or are there still learnings and improvements that the FCA and businesses can look to implement?
Transparent, Simple Communication
Over the past year, the Duty has undoubtedly prompted financial institutions to reconsider how they engage with their customers. Emphasising transparency and simplicity in communications has led many organisations to revise their product information, working to strip away unnecessary jargon, and present customers with clearer options with improved accessibility across digital channels and in-person interactions.
For many consumers, the most noticeable change has been the improved transparency in communications. Products are now marketed with clearer language, and the terms and conditions are more straightforward. This has enhanced trust, as customers feel more informed about the services they are purchasing.
While these changes represent significant progress, it may be tricky to accurately assess whether the measures implemented with the Duty have effectively garnered positive outcomes for consumers.
Data and Reporting Shortcomings
One of the critical areas where the Duty has fallen short is the quality of data and reporting on customer outcomes. The FCA’s request for reporting from large insurance firms revealed significant gaps in the ability of these organisations to track and analyse customer satisfaction effectively.
When the FCA requested reporting from large insurance firms late last year, many had limited insight into actual customer outcomes, with metrics lacking details to provide accurate recommendations. In addition, the Financial Ombudsman Service, which handles complaints if consumers feel that firms aren’t meeting the Duty’s standards, has reported that poor customer service continues to be one of the biggest areas of complaint since the introduction of the Duty, due to poor CX coupled with a lack of timely support; suggesting that while companies are striving to meet the new standards, there is still a gap between intention and execution.
To address this, financial institutions must invest in better data analytics tools and develop more sophisticated methods for measuring customer outcomes. This will not only ensure compliance with the Duty but also enable companies to identify areas for improvement and drive meaningful changes in customer experience.
Recommendations for Financial Services
To meet the evolving expectations of customers, financial institutions must embrace an omni-channel approach that allows consumers to engage with them through their preferred channels. As suggested by the ICS, a true omni-channel approach means expanding beyond traditional voice support to include self-service options, chatbots, social media, and other digital platforms. However, the key to success in this area lies in ensuring that all channels are integrated, providing a seamless experience where customers can easily switch between modes of communication without losing continuity or context. Furthermore, organisations in the Financial Sector can take this one step further and provide contact centre agents with pre-approved, generic articles that help them relay information accurately and consistently.
In addition, while automation can play a crucial role in enhancing efficiency, it must be implemented with a human-centred approach. One notable factor contributing to customer dissatisfaction overall is the overuse of automated systems, which often result in long wait times and impersonal responses. This problem is compounded by the frequent use of “sorry, we’re experiencing unusually high call volumes” messages, a tactic highlighted in ongoing research by Martin Lewis. Such practices, perceived as attempts to deter callers, are particularly frustrating during the cost of living crisis, where customers frequently need to discuss complex, personal matters with businesses. Financial institutions should strive to make automated systems intuitive and responsive, reducing the frustration for customers.
Could Consumer Duty Set a Global Standard?
In the same way General Data Protection Regulation (GDPR) has become the gold standard for data protection regulation worldwide, Consumer Duty could set a precedent that other industries could follow, especially for industries that are already heavily regulated. For this to happen, the FCA and financial institutions must demonstrate the Duty’s success through measurable improvements in customer satisfaction and trust, with assistance from financial institutions willing to go above and beyond for their customers.
Recently, US President Jo Biden announced a “Time is Money” initiative that will encompass similar regulations to the Duty, but would apply on a federal level to all businesses. If passed the regulation would force US businesses to make it easier to unsubscribe from memberships, and crack down on customer service “doom loops” that frustrate customers seeking assistance. This potential new US legislation mirrors a recent prediction by Gartner that the EU could make the “right to talk to a human” a law by 2028.
The Path Forward
Twelve months may be too soon to fully evaluate the long-term impact of Consumer Duty on CX, with recent additions of rules still coming into force as late as July 2024. However, its inaugural year has provided valuable insights into the areas where financial institutions are excelling, and where they need to improve. As the Duty continues to evolve the FCA and financial institutions must remain vigilant and proactive to enhance customer outcomes.
The long-term success of Consumer Duty will depend on the willingness of financial institutions to go beyond mere compliance and to embrace a customer-centric approach. By doing so, they build deeper, more trusting relationships with their customers—setting a new standard for excellence in Consumer Duty as well as the financial services industry as a sector.
Martin Taylor is Co-Founder and Deputy CEO at Content Guru
Content Guru is the world’s foremost vendor of mission-critical, high-scale, feature-rich cloud contact centre and CX (customer experience) solutions.
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