Fair Treatment in 2024
As 2024 gets underway, one of the Financial Conduct Authority’s foundational principles – treating customers fairly – isn’t just developing, it’s being entirely reimagined.
We’ve already seen how quickly the regulator intervened when it had concerns about the time taken to pass on interest rate increases to customers of savings accounts, and a warning issued in mid-December around ‘double-dipping’ charges imposed by some investment firms confirms the first action wasn’t an outlier. Scrutiny over firms’ treatment of their customers – and whether fairness is a primary focus of business – will play a major role in the FCA’s supervisory activities this year.
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Treating Customers Fairly was an initiative inherited from the Financial Services Authority, but on the back of a number of scandals and concerning practices, the FCA is trying to drive a new approach. The Consumer Duty sharpens the focus on fairness; fairness is no longer a compliance tickbox, firms now need to pioneer new standards.
But this can work to businesses' advantage, as well as customers.’
Trust in financial services is one of the FCA’s objectives, and it’s one of the most difficult to steer. In mid-2023, research by the Financial Services Compensation Scheme found that only a quarter of consumers trust the industry to act in the best interests of clients, while almost a third actively distrust the industry. The same study found that where consumers were aware of protections offered by the FSCS, this boosted confidence. The takeaway for all firms here is that where customers feel they will be supported and protected, this leads to improved trust and confidence.
Customers will choose to put their money where their trust is. So fair treatment of customers isn’t just regulatory rhetoric. Fairness, then, can be a strong way to excel in a crowded marketplace. So where can we look for a guide to best practice?
In mid-December, the Regulator published its findings on Retail banking; required reading for banks, building societies and mortgage providers, but useful for all firms given the above, and particularly in advance of the closed book product deadline of 31 July 2024. The review looks at 70 product journeys and firms’ work to develop frameworks, apply methodologies and the resulting outputs. The FCA saw good examples, with some brief examples of best practice highlighted by the regulator, which will be helpful to all firms during their reviews.
For example, the FCA notes that firms thinking carefully about how they can set baseline standards of good customer outcomes, which feed into supplementary frameworks or guidance documents, such as customer communication playbooks, pre-work for gap analysis workshops or customer support criteria documents tend to lead to good outcomes. The Regulator notes that this helped to implement a consistent approach which supported the identification of gaps in processes and approaches across the business.
The use of data was also noted, strongly suggesting that this is one of the metrics the FCA will be using in its scrutiny of firms over 2024, and which it considers could be a keystone in identifying remediation actions. Unsurprisingly, the FCA found that firms that used “a range of data points, rather than relying on a single source of insight for their review, were better able to consider different types of customers and outcomes for customers in different scenarios.” Crucially, these firms were able to very clearly identify areas that needed work to bring them into line with the Duty. One of the examples of best practice the FCA seems very keen on is the building of data libraries to use alongside existing MI to provide insights into key areas.
Building a data library sounds like a huge job – it does not have to be. Using external published sources is a great way to start this task. Including research and findings from charities, public bodies and the FCA itself, and crucially, identifying specific findings that relate to your customer base, that can be used to shed more light on MI, which can identify aspects of the customer journey in real time. And using key findings from this library can help to identify customer needs, help to hone customer outcomes, which in turn will lead to practical, positive effects on customer experiences.
Getting in as many ‘quick wins’ as possible early on sounds like trying to cheat the system, but the Regulator itself is keen on this approach, advising firms to concentrate on making the changes that can have the most impact, most quickly, first.
The FCA have highlighted a lack of training as a key finding resulting in poor outcomes for customers, whether introductory or refresher training. RB Compliance can help firms here. Our range of e-learning courses have been renewed for 2024, with updated guidance, best practice and scenarios.
You may find our range of resources on the Consumer Duty helpful.