Two-thirds of the UK’s banks and building societies are not yet Consumer Duty compliant and two in 10 say they will not become compliant before April, the original date set by the Financial Conduct Authority (FCA).
Twenty-two per cent of CEOs, chairmen and directors admit that the banks and building societies they work for are unlikely to become compliant with the regulation by the time the April deadline comes around.
This is the central concern of the newly-published research by Moneyhub, the open finance, open data and payments platform.
The FCA’s Consumer Duty regulation requires industry players to direct their initiatives and operations to deliver good outcomes for their retail customers.
Firms must act in good faith towards their customers and mustn’t seek to cause foreseeable harm to them or the wider industry.
Additionally, the services of these firms must enable their customers to pursue their own financial objectives.
The FCA expects manufacturers to have completed all the necessary reviews to meet the outcome rules for their existing open products and services by 30 April 2023.
Likewise, new and existing products or services that are open for sale or renewal have until 31 July 2023 to implement the regulation.
Moneyhub echoes the concerns it raised around the implementation of the regulation in a report released last month, while The Fintech Times has also questioned the industry’s preparedness for the deadline.
Data from its latest research indicates that a majority 87 per cent agree that the new regulation will have a ‘significant impact’ on how they perform business.
Importantly for FCA-regulated companies, these regulations will eventually affect firms’ current 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.
Respondents from the banking sector report feeling like the regulation will impact them the most.
Despite this, only 32 per cent feel confident in their rate of compliance, while the remaining two-thirds of respondents do not.
Concerningly, 11 per cent of senior decision-makers said they didn’t know anything about the new regulation, with four per cent only hearing the news for the first time during the research’s interview process.
New regulations, new challenges
A third of respondents cite ensuring communications equip consumers to make effective and timely decisions about their finances as the most challenging aspect of embracing Consumer Duty.
A further 27 per cent see offering specialised products and services that meet the needs of the customer as the most challenging aspect, while the same proportion point to the provision of customer-specific support.
As with anything in fintech, where there’s a challenge, there’s a solution waiting to be realised.
On this front, 53 per cent confirmed that they would be investing in technology to deliver these solutions, namely in the delivery of more personalised and targeted communications.
A similar 43 per cent will use their investment to access customer data and insights.
Only a full understanding of customers’ financial situation will enable financial services providers to offer the appropriate products and services to consumers, as outlined in the Consumer Duty.
For this measure, Moneyhub puts forward the application of open finance as a solution to these challenges.
Open finance has a proven capability of delivering consent-driven data insights that can help banks and building societies meet their Consumer Duty obligations before the July 2023 deadline.
Speaking on why the industry must take Consumer Duty seriously, Samantha Seaton, CEO of Moneyhub describes the regulation as “so much more than a box-ticking exercise.”
She explains how the regulation “shifts the responsibility from the consumer to us, the financial services industry, and in particular the product providers.”
Seaton goes on to identify the industry’s strengths in understanding how money works. However, it’ll only be able to reach full compliance with the regulation “if we have an aggregate view of the customer.”
“Open finance solves this challenge,” Seaton confirms, as it provides an aggregate financial view of the consumer with their explicit permission.
“This means open finance enables banks and building societies to have a true understanding of their customer and be able to prevent any foreseeable financial harm, one of the key cross-cutting rules of Consumer Duty,” she concludes.
Image and article originally from thefintechtimes.com. Read the original article here.