Welcome to the third day of our week-long editorial series celebrating the anniversary of the Consumer Duty (CD). Yesterday we focused on the positive and negative (if there are any), impacts of CD, which you can find here! Each day we’ll continue to explore different facets of how Consumer Duty has reshaped compliance, business practices, and customer outcomes across financial services.
Today’s first year anniversary marks a significant milestone, reflecting on the strides made by firms to prioritise consumer needs and deliver good outcomes. Our series looks into the necessary changes in compliance, the role of technology in supporting CD, the importance of data and analytics, the impact on customer engagement, and the future outlook for Consumer Duty.
Day 3: What role did and does technology, such as AI and data analytics, play in supporting CD?
Today we explore the significant role of technology in enhancing consumer outcomes. Financial industry leaders discuss how AI and data analytics enable better alignment with regulatory demands, improve customer engagement, and ensure compliance. They highlight the importance of real-time data capture, the benefits of AI in understanding customer needs, and the challenges of managing technology adoption. The focus is on leveraging innovative solutions to meet evolving consumer expectations and drive industry-wide improvements.
Chris Jones, Chief Product Officer at Dynamic Planner said: “For me, the duty is about culture, behaviour and outcomes, technology is the enabler – it enables people to do more varied things more often more consistently and for that to be evidenced more accurately. What is important is the culture and intentions of the business, people and content within the software; are they aligned to consumer duty and enabling it or are they holding you back?
Being able to capture the actual conduct of those performing regulatory activities digitally in real-time, as well as the true customer information, then analyse and report on that as data is going to be vital for success. We are already seeing that post-rationalised files, checklists and a ‘new business’ book doesn’t cut it; we can do a lot better than that.
AI is just a natural evolution of technology that will affect our clients’ lives, where they work, where they invest, and the products and services they take. Technology just gets better so the expectations of consumers get higher and our ability to meet those expectations becomes easier. The duty reminds us as to who and what it’s all for.”
Nick Henshaw, Head of Intermediary Distribution at Wesleyan, said: “As we come to the end of the Consumer Duty implementation period, there are a couple of specific watch outs for the advice industry we’ve come across during our conversations with intermediary customers.
“If advisers outsource investment services, to Discretionary Fund Managers, for example, it is still their responsibility to provide suitable services. The regulatory buck always stops with the adviser.
“Advisers should also consider whether the technology they use allows them to fully meet the unique and evolving needs of their clients. For example, their platform might not give them access to more specialist investment options, such as smoothed funds that are designed to mitigate sequencing risk and volatility risk during periods of economic uncertainty.”
Legal & General’s retail division shares the following comments: “We use AI tools to help analyse our Net Promoter Score (NPS) surveys, which measure how likely customers are to recommend us to family and friends, including questions specific to Consumer Duty. This means feedback can be flagged to the operations teams immediately to ensure our products and services continue to meet our customers’ needs.
We have also made use of technology to check the readability of our customer documents. Tools like Hemingway and Microsoft’s built-in text analysis utilities have been very helpful. They’ve helped us both set common baselines for readability levels in new documents and measure changes in existing ones as we’ve edited them.
And, of course, implementing the Consumer Duty is in part an internal comms challenge. Our Consumer Duty team, and other related teams, have shared information and run regular, very helpful, update events through it.”
Sebastien Petsas, Managing Director of Financial Services Compliance and Regulation at Kroll said: “Technology can, and does, play a crucial role in helping firms achieve their goals in a way that is consistent with Consumer Duty requirements. Data analytics tools, particularly those powered by AI, can support firms in understanding customer needs and preferences. Meanwhile, AI is also able to predict potential compliance risks based on historical data, enabling firms to proactively mitigate these risks.
It’s no great surprise that AI’s capacity to assist doesn’t end here. The technology can be successfully leveraged to personalise the customer experience, analyse feedback to identify areas for improvement, and is well positioned to provide interactive and personalised training programmes for employees, ensuring their comprehensive understanding of compliance requirements.”
Whilst technology, such as AI, offers much promise for the future of consumer outcomes, we must also remember its adoption comes with risks which must be understood and managed (e.g. having quality data), alongside the potential opportunities.”
Jean-Marc Sookun, Principal Consultant at Capco said: “The role of technology in supporting Consumer Duty is becoming increasingly important. Firms must use this opportunity to invest in innovative solutions to better understand their customers and improve the outcomes they receive. With initial deadlines either imminent or past, there is now space to rethink and innovate current practices. Technology will be a key enabler in enhancing customer engagement, protection, and overall experience.
Data and analytics have been critical for firms as they respond to Consumer Duty, and this is an area where clients have been particularly focused. It’s vital that firms can evidence the outcomes their customers are receiving, and the data and analytics they use to back up their decisions are the cornerstone of that evidence. For example, exploring how price changes impact different types of customers or tracking which services and features are used differently by customers—these insights are crucial to consider before making changes.
AI, while requiring careful management in its implementation, can significantly aid the development of Consumer Duty. It can predict customer behaviours, ensure communications are appropriate and effective, detect fraudulent activity, and provide accurate information through chatbots or support staff. By leveraging these technological advancements, firms can better meet the evolving needs of their customers and power up their response to Consumer Duty going forward.”
Ruth Handcock, CEO of Octopus Money said: “As we mark one year of Consumer Duty, it’s clear the regulation has had an impact on the industry as our research conveys. And yet, in the pursuit of improved client outcomes, we’re inevitably seeing a short-term tightening of advice availability rather than long-term innovations that will propel the industry forward. If workloads are doubling, and minimum fees are increasing, it feels inescapable that the advice gap will widen as more and more clients are unable to access good quality financial advice.
Despite these initial, unintended consequences, I feel buoyed by the chance for a second wave of opportunity after this initial response. Innovation to serve clients and measure outcomes in new ways takes time, investment and collective action. As an industry, we have to foster an environment that enables everyone to adapt their service models to serve all clients effectively, regardless of their asset size.
It will require creative thinking and implementation of new technology, alongside an openness to cultural transformation and partnership where firms aren’t solving the same problems in parallel. This open-source approach aligns with the spirit of Consumer Duty, but also ensures the long-term sustainability and growth of the sector for the good of every client.”
Speaking today at the FCA’s Consumer Duty: 1 Year On event, Abby Thomas, Chief Ombudsman and Chief Executive at the Financial Ombudsman Service said:
“The Consumer Duty has meant firms need to focus even more on the outcomes that customers receive.
“Over the last year, we’ve continued to take action where we think businesses haven’t treated customers fairly, and in line with the requirements under the Duty.
“I urge firms to ask themselves whether they’re supporting their customers in the way they’d expect to be supported in the circumstances. We want to help firms resolve complaints fairly first time, without the need for a case to come to us, which is why we share insight for businesses to identify ways to improve their systems or processes. This should reduce more complaints further down the line.
“The Consumer Duty came into force at a time of significant change for the Financial Ombudsman Service. I’m really proud that we’ve reduced the median time it takes to resolve a case, from 4.8 months in 2022/23 to around three months in 2023/24.”
What’s the consensus?
The implementation of Consumer Duty has significantly impacted the financial industry, fostering a shift in culture, behaviour, and outcomes, with technology as a key enabler. Firms are increasingly leveraging AI and data analytics to understand customer needs, predict compliance risks, and personalise experiences. Real-time data capture and analysis are vital for success, with tools improving document readability and enhancing internal communications. However, the adoption of technology comes with risks that must be managed.
Despite initial challenges, such as increased workloads and widening advice gaps, the industry sees potential for long-term innovation and improved client outcomes. Leaders emphasise the importance of creative thinking, cultural transformation, and partnerships to adapt service models effectively. By investing in innovative solutions, firms can better engage and protect customers, ensuring their evolving needs are met.
This approach aligns with the spirit of Consumer Duty, aiming for sustainability and growth across the sector. Embracing technology and fostering a culture of continuous improvement is crucial for meeting consumer expectations and ensuring regulatory compliance in the dynamic financial landscape.
