Turning challenges into positive outcomes: Why UK’s consumer duty aims to flip the script by putting people first

By Adam Williams, Director of Finance, Risk and Compliance with Capgemini Invent UK

Financial firms in the UK are banking on cultural change and putting people before profit

Honesty. Transparency. Compliance. For the financial-services sector, these three words have highly charged definitions. Together, it leads to good outcomes for consumers. And that’s the goal of the new Consumer Duty advisory introduced by the UK’s Financial Conduct Authority (FCA), which “sets higher and clearer standards of consumer protection across financial services, and requires firms to put their customers’ needs first.”

There is plenty of opportunity – and urgency – for improvement. The FCA’s recent Financial Lives survey of more than 19,000 respondents found that fewer than half (21.9 million) of UK adults had confidence in the UK financial-services industry, and only 36 percent agreed that most financial firms are honest and transparent in the way they treat them.

Creating a customer-centric culture shift

Obligations under the Consumer Duty involve improving customer outcomes related to four areas: products and services, price and value, consumer understanding, and consumer support. To meet these requirements, banks and financial firms need to shift their priorities from products and profit to people. But how can they develop data-driven strategies around seemingly abstract concepts and then deliver qualitative and quantitative evidence to satisfy the FCA?

Financial firms need to embed the tenets of the Consumer Duty within every element of their business, supported with an iterative practice of continuous improvement. That starts with getting a deep understanding of existing processes to pivot toward a customer-centric transformation. Most firms will also need to engage in a complete culture shift – considering their purpose, ensuring executive oversight and governance, earmarking champions for change, and providing training – with the goal to deliver good short- and long-term outcomes for customers.

Focusing on longer-term outcomes

For many financial firms, this new mindset is a departure from the traditional yield model that prescribes certain steps for selling specific products. Now, the focus is on the actions taken up front and the impacts they have, both on improving customer outcomes and avoiding harm. As part of this culture shift, financial firms need to recognise that customers, especially vulnerable ones, have diverse needs at different times of their lives.

How can data deliver on those expectations, while providing clear, transparent communication, especially when the customer journey is nonlinear? Like most complex organisations, financial firms typically have silos across product lines, along with technology silos and data silos. For instance, many customers have multiple profiles delineated by product line (e.g., mortgage customer, credit card customer), so communications can be fragmented and frustrating. To get a deep understanding of the holistic customer journey, such silos need to be broken down with a single source of data truth. This transparency ensures these customer insights can be accessed and analysed by all teams, whether financial advisors, data scientists, or marketers.

Using data to build a 360-degree view of the customer ­is not the end point of providing personalised services; it’s the start. Despite best intentions, treating all customers the same is not synonymous with delivering equitable services. A frictionless banking experience, for example, is often considered the ideal in digital transformation, but sometimes resistance can be revealing – if you stop to question why such a conflict exists.

One case in point: the FCA reported that in 2022, 88 percent of people (42.9 million) chose to bank online or use a mobile app. The trend is clear. The flipside, though, is that the FCA also found six percent of people (3.1 million) still use cash and rely on face-to-face engagement. A customer-centric approach recognises that removing such banking options could put vulnerable people further at risk. Unsurprisingly, the FCA expects firms to meet all their customers’ needs, including access to cash, mandated under the Financial Services & Markets Act 2023. Using data to generate customer insights at ongoing increments, like in the example above, reveals an opportunity to develop near-term solutions while improving long-term outcomes.

Rethinking performance and risk through a fiduciary lens

Some of Capgemini’s work across the industry takes existing key performance indicators (KPIs) and key risk indicators (KRIs) and puts them through the lens of Consumer Duty. Often, this exercise points to how a product-centric approach might lead to a good business outcome but not a good customer outcome. Of course, financial investments cannot be guaranteed, and it’s dangerous to equate a customer having more money at the end of their financial lifecycle as the main measure of success. Instead, financial firms need to be proactive in preventing harm. If a customer could have been better off to pay down a certain loan or credit card before another one, that’s an improved outcome.

At the same time, regulators are focusing on empowering customers to better understand financial products and make more informed decisions. Again, how can something like financial literacy be quantified to evidence consumer understanding? Take technology as an example. If a digital banking app has been introduced and the customer uses it as intended, which supports them to make better financial choices, that can be considered a positive outcome. This example also illustrates the importance of how financial firms can embed Consumer Duty in the development and rollout of products by enhancing consumer understanding, engaging in two-way communication, and providing a fair exchange of value.

Holistic insights and decision-making

Of course, financial firms can’t guarantee a customer outcome, but they can positively impact it. The COVID-19 pandemic amply illustrated this when some financial firms allowed furloughed customers to defer their mortgage payments during a particularly challenging stage – not just of their financial journey but of their life journey. It was a shift from the transactional nature of relationships to one that reduced harm and built customer resilience and loyalty.

Financial firms that approach Consumer Duty simply as a compliance exercise will miss an opportunity to use data to their advantage and differentiate themselves in the market. This culture shift will give firms a rare opportunity to re-evaluate their purpose and products and find new strategic benefits revealed when putting customers first, ultimately creating good outcomes for everyone.