Consumer Duty in FS – What the FCA Good Practice Report means for Personalisation at Scale in FS
Identifying Multichannel Vulnerable Customers
During early lockdown (remember that time!), large numbers of people who had previously not used digital channels suddenly had to. They had previously chosen to buy face-to-face because they preferred the human interaction, it was what they were used to, or they had particular needs that meant it was best or easiest for them. This group was disproportionately more likely to be elderly, or vulnerable. And this was a particular challenge in financial services, because interactions and customer behaviour is more complicated and lengthy than, say, grocery shopping.
I remember a conversation at the time with a financial services client, who said that onboarding and providing specialist support for this “new to digital” group of customers was his and his team’s biggest priority. This was partly because it was the right thing to do, partly because it required a slightly different customer experience, but partly (mostly?) because it was the biggest growing digital customer group and represented the biggest opportunity for the digital team.
Fast forward almost exactly 4 years since that first lockdown, and the FCA published its first report about the implementation of the Consumer Duty requirements across the financial services industry. While this obviously extends to all areas of the banking and insurance world, and not just digital and multichannel, some of the findings are instructive for digital officers in FS, which suggests there are improvements, and indeed opportunities.
Consumer Duty implementation: good practice and areas for improvement | FCA
I won’t go through the full report, but I’ll highlight two areas where I think there are areas that digital managers should take note, especially those who are implementing personalisation technologies, as I think these points raise two use cases for personalisation at scale in FS.
Use Case 1 - Culture and Governance – Better Data and Metrics to Understand Customers
In the Culture and Governance section, the report highlights that examples of good practice and bad practice.
Those who are demonstrating good practice should “develop new data and metrics to better understand their customers” and “introduce appropriate governance so that action is taken where problems are identified”.
Those that need to improve, by contrast, “need better data and monitoring strategies. Firms should not be complacent and assume that they can just repackage existing data. We want firms to think seriously about what information they need to really understand their customers’ outcomes and issues they may be facing.”
This last point about going beyond existing data is the critical point for digital teams, especially given the earlier point about lockdown customers. Understanding the changing behaviours of customers and ensuring they are treating correctly and fairly in all channels is essential to adhere to this point on Consumer Duty. As many more recent “multichannel” customers – those who were forced to use online during lockdown, but may well have switched back to traditional channels since – will exhibit different customer behaviour to other customers, digital and multichannel stakeholders have the opportunity to create these new metrics to help deliver best practice for Customer Duty.
This may well require additional budget or technology to deliver; just tracking web channels without joining up to other channels, like the call centre or in branch, will not be enough. And it will need to be done in a timely manner; this can’t take months to join the data at the back end.
In general, however, FS has been leading the way in this new CDP and customer journey analytics technology, so this either adds to the existing use cases, or creates a key area by which such investment can deliver value to the wider business.
Use Case 2 - Vulnerable Customers – Multichannel Segmentation and Vulnerable Customer Identification
In a similar way, the best businesses for Consumer Duty in this area have “fully reviewed their approach, systems and processes, centralising operations relating to vulnerability”. This has led to using more subtle, predictive approaches to recognising and identifying potentially vulnerable customers. One of the criticisms of failing firms in this area is that they have tended to “automatically assess all consumers over a certain age as vulnerable. While age is relevant to vulnerability, a generalised approach risks firms not tailoring support to reflect individual needs”. This is a very good point, and shows the importance of splitting out the different segments – being old doesn’t necessarily make you vulnerable. As a result, financial service firms need to use customers’ data in a more holistic way, and be able to use that data to develop trends and new ways to identify vulnerable, and potentially vulnerable, customers.
The Ideal Use Case for Personalisation at Scale?
What’s interesting about this is two things. Firstly, that those companies exhibiting good practice are already “capturing data and [identifying] trends” and being focused on “outcomes for individual customers due to better-quality interactions with firms”. In other words, good practice for Consumer Duty for vulnerable customers is data-driven, and focused on delivering personalised customer experiences.
The second interesting point that follows on from that is that this almost perfectly describes personalisation at scale. Using new ways of looking at multichannel data to understand customer journey and interaction analytics is the first part of any personalisation strategy, followed by the creation of segments using these data points, and finally the creation of tailored customer experiences with their ends in mind.
What’s perhaps more surprising is that, whilst FS is clearly leading in the take-up of personalisation strategies, consumer duty is not a use case that has been mentioned in relation to this; the focus has been on driving new customers. It’s also worth saying that, as the report says, the take-up of consumer duty in investment management areas has been very slow. So, there is a huge opportunity for FS companies to use their technology investments in multichannel analytics and customer data platforms to drive their Consumer Duty compliance and also deliver better outcomes for customers.
Fortunately, understanding and delivering customer insight and how to deliver value and data-driven customer experiences is what we at Station10 have been helping with for many years. If you want to discuss further, please get in touch.