Consumer Duty: viewed negatively it’ll impact your business negatively
There have been no shortage of opinions on Consumer Duty over the last 12 months and I can’t see any let up in 2024.
As with any regulatory change, viewed negatively it will impact your business negatively; viewed positively and you will be able to see the opportunities that usually exist.
Focusing on positive outcomes for your customers shouldn’t be the hot topic that it is. But if this year we see an improvement in product development and distribution – all of which lead to customers getting better value for their hard-earned cash – then that would feel like a big win.
Of course, how companies big or small deliver actions against their words is always the challenge. Tough decisions need to be made in boardrooms because better value for customers can mean lower margins, alongside significant investment to make those changes.
Advice gap: killing off disingenuous industry bleating
Eyes may roll at yet another attempt from the regulator to address inclusivity and the ‘gap’ in access to advice for people with not much money.
It’s well-meaning and certainly has moved forward from previous versions but ultimately still requires engagement and commitment from an industry with no real incentive to change the status quo.
I have long been a champion of financial advice for everyone. But you don’t make that happen by providing something other than advice. It’s wrong – and patronising – to decide whether someone needs advice or not based on the amount of money they have.
But in response what certainly shouldn’t happen is those people – who the industry deems ‘unprofitable’ – are forced to accept lower consumer protections just so the advisers agree to help them.
When the industry says the reason it cannot provide advice to lower ‘value’ people – customers who the industry constantly bleats on about needing better financial education – is because of regulation is wildly disingenuous. We should be more honest about that.
The real reason is there’s more profit to be made elsewhere or through non-advised solutions where the issue of suitability is the customer’s problem.
The industry could sort this problem out very quickly but simply doesn’t have the incentive to do so. Hopefully the consultation, alongside Consumer Duty, will see new services providing real access to real advice for the masses rather than the exclusive few.
Open Data: a threat and an opportunity to financial firms
It’s amazing to think Open Banking has recently celebrated its 5th birthday. It has been an interesting time with several use cases and business models coming and going.
Tools such as account aggregation – something that not long ago you would pay for – have now becoming a utility on almost all banking apps.
The fascinating development will be the Open concept’s move into other financial areas and what this will mean for customers and those providing services to them.
If I think about solutions to the advice gap and inclusivity issues, then Open Data will play a pivotal role in the successful business models.
As with most things, a slow burn will see rapid acceleration and adoption over coming years and should be seen as real force for good. It will be both a threat and an opportunity to many financial firms who will have to understand that more control will move to the customer.
AI/ML: mass market advice revolution?
There can’t be a company – big or small, new or old – that doesn’t have AI on their roadmap for the future. What this exactly means in practice is slightly less clear but it’s obvious that AI in some form has the very real potential to make a significant impact.
Any business that operates, or has ambitions to operate, at scale will need to be competitive in this space either by harnessing third-party solutions or, where resources allow, building their own models.
Analysing huge amounts of data quickly and performing repetitive functions with minimal (or at least lower than human) error risk are the two main areas for me.
This fits well with the other topics above and I would expect to see some form of AI or Machine Learning (ML) in the successful propositions providing advice services to the mass market.
Customer personalisation: engagement more than just words on screens
Finance and money (especially for people who don’t have a lot of it) can be a daunting and frankly boring subject. This is reflected in both financial literacy levels and customer engagement.
Shiny apps, trendy language or even toy characters all continue to struggle to make any real cut through to the public in terms of their finances. So many businesses have tried, and failed, to ‘get rid of the jargon’.
Engagement is more than just words on screens. Any attempt should consider what is in it for the customer. If you’re an ISA provider then no matter what you do, you’re not going to get much engagement from simply providing balances, fund breakdowns and some articles on savings.
Personalisation is absolutely key here. This is going be an important feature of Consumer Duty and represents a big opportunity for Open Data propositions.
Data privacy and security: nothing destroys value like a security breach
Security and privacy is still the biggest issue affecting the financial services industry and yet it’s the one I probably read the least about.
It’s either because the industry doesn’t do enough about it (not true) or that the industry doesn’t think the consumer wants to hear about it (not true).
The strength of a company’s data privacy and security should be as prominent as any app feature, and resource and investment should be central to technology planning.
Given how many companies are putting technology at the front and centre of their future planning it’s always a surprise when they can articulate what the product will do but then struggle about what security there is.
You can have the best product, best brand and best customer engagement – but nothing destroys value like a security breach. With advances in technology comes advances in criminal capabilities and that is only going in one direction of travel.