The FCA's new Consumer Duty: What products & processes must be reviewed?by
The FCA's new Consumer Duty will lead to "a major shift in financial services" and how they should provide consumers with finance products. In the second of three articles exploring how financial services brands should respond, Graham Hill explains how they should be reviewing their products and processes.
The Financial Conduct Authority (FCA) has published a new Consumer Duty setting out the standard of care retail finance firms must provide consumers. Firms should follow seven steps to comply with its complicated requirements.
In a nutshell…
In the first post in this series, I described three approaches that retail finance firms have to respond to the FCAs new Consumer Duty and selected the Review option as the one most likely to be taken.
In this option, the firm reviews its current products, go-to-market processes and problem solving from a regulatory perspective and improves them where they unlikely to meet the new Consumer Duty.
Carrying out a review of the retail finance firm’s products, processes and problem solving involves a straightforward seven-step process:
- Selectively benchmark current product features, conditions, fees and charges against the leading market products.
- Review the adequacy of current (and planned future products) for their target markets' needs and expectations.
- Review the clarity, informativeness and appropriateness of communications during product sales, onboarding, billing and other key stages in the end-to-end product lifecycle.
- Review consumer feedback across channels, to identify problems, areas requiring improvement and innovation opportunities.
- Review the consumer complaint handling, response management and remediation processes, to identify problems and areas requiring improvement.
- Review the previous implementation of the earlier 'Guidance for firms on the fair treatment of vulnerable consumers', to identify implementation opportunities you can build upon, or learn from.
- Roadmap, plan and implement the review, improvements and innovation opportunities.
The roadmap will likely extend through two phases over the following 24 months. In Phase 1: Current Products, the review will focus on current products (and planned future products), to meet the July 2023 deadline. In Phase 2, Closed Products the review will focus on closed products (that are still live), to meet the July 2024 deadline.
Three key takeaways…
- Expand the cross-functional team setup to plan the review to carry out each of the seven steps. The team should maintain a core of members, led by the business owner and augmented by SMEs who join it to carry out particular steps.
- Prioritise the consumers, products and go-to-market processes you are going to start with. Trying to start with all of them at the same time is a recipe for chaos.
- Although most firms are product-oriented, keep the consumer, their needs and expectations in the front of your mind during all the Review steps. This will not only ensure you keep close to the letter and spirit of the new Consumer Duty, it will also help you identify innovation opportunities for future products.
In the final post, I will look at how, by using the insights gained during the Review, it provides retail finance firms with options to create more value for themselves and consumers, by adopting a more profitable, market-oriented business model.
Other articles in this series:
Graham Hill has been a Management Consultant, Interim and Director for over 30 blue-chip companies, in 15 different countries, over the past 30 years. Most of his work has involved building complex service systems, directing their implementation and managing the resulting organisational transformation. He is an acknowledged SME in customer...