In our latest Consumer Duty webinar series,”Demonstrating Consumer Duty Compliance with Technology,” Joseph Twigg, CEO of Aveni, sat down with John Liver, Strategic Adviser at Kore and NED at Barclays, and Alan Blanchard, Head of Partnerships at VERMEG. They discussed the latest tech solutions in product and service governance, automated monitoring of Consumer Duty KPIs, and other innovations that can keep you ahead of the FCA’s expectations.
Watch the full replay here.
Here are key takeaways from the session:
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The Main Challenges Surrounding Consumer Duty Compliance
The FCA’s Consumer Duty is aimed at improving consumer protection and ensuring good customer outcomes. Complying with this requirement involves not just implementing new strategies but proving they’re effective with data-backed evidence. This involves a whole new level of granularity of data that wasn’t previously required. The pillars of the Duty that organisations will have to build their programs around are: product suitability, price and value, customer understanding, and customer support. Each area needs new strategies and more detailed data gathering and monitoring.
Compliance is an ongoing process of “test, learn, and act,” focused on understanding target markets, assessing product value across customer types, and monitoring the entire product life cycle. The FCA emphasises that the regulation is not a one-off activity but requires continuous monitoring, data gathering, learning from the data, and using insights to improve products and services.
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Addressing the Absence of a Benchmark
Consumer Duty is a principles-based regulation so the FCA has not provided detailed instructions on what individual firms should do to comply. Instead, they provided a series of examples to illustrate the general principles and outcomes that financial firms should strive to achieve. So it’s up to senior management, boards, and project teams to identify key issues and determine their market position. As a result, benchmarking opportunities are limited.
However, product manufacturers and distributors are required to share information about their products and value with each other by April 30th. Over the next few months, firms will gain a better understanding of what constitutes bad practices, what is appropriate, as well as what others in the industry are doing. Companies like Aveni and Kore who work with firms in this industry can also provide guidance and insight into where industry players typically stand.
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How Companies Can Use Technology to Manage and Future-Proof Regulatory Compliance
Effectively managing and future-proofing regulatory compliance can be challenging due to the non-prescriptive approach of the FCA’s regulatory framework. To navigate these rules, companies need two components: a technology platform to store the rules and an expert to interpret and provide specific guidance on how to apply them. Currently, compliance is typically managed on a spreadsheet, with columns detailing the rule, its impact on products and services, and necessary controls and implementation steps.
Moving these requirements and interpretations into a digital platform would enhance compliance efficiency. With a digital platform, compliance status can be determined by querying the dataset with questions such as ‘Are the features and terms of the product transparent and easy to understand for customers?’ The platform can then provide a result indicating whether or not the product meets the required standards. Additionally, a centralised database can be updated in real-time as rules change, and it can be integrated with various back end systems.
Implementing significant regulations like the Consumer Duty and updating internal policies can be time-consuming. However, digitising the rules enables the creation of a digital unit that can be reused for future products and services. Companies can leverage the same interface to apply compliance standards efficiently across different activities.
- Impact of Lengthy Technology Procurement Processes on Consumer Duty Compliance
Due to the complex and time-consuming nature of some technology procurement processes, some companies are resorting to short-term tactics to meet the deadline, potentially compromising their long-term strategy. This rush to comply often results in a narrow focus on achieving short-term goals, without considering sustainability or embedding the solution into the business. This approach can lead to missed opportunities, inefficiencies, and a lack of efficiency and robustness in business processes.
FCA outlined a follow-up phase after the July implementation date to evaluate how Consumer Duty requirements are embedded into business processes. This includes evaluating management information (MI), dashboards, and the ‘test, learn and act’ process. To achieve consistency, coherence, and traceability in these processes, firms need access to advanced technology solutions. Without the right technology, companies risk falling behind and failing to meet the long-term goals of Consumer Duty compliance.
The regulator will show leniency towards companies that take a proactive approach and demonstrate a “direction of travel” in their efforts to review and implement technology and processes that comply with the Duty. Utilising Aveni’s free proof of value is a quick and easy opportunity to demonstrate your commitment and progress in this direction.
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The FCA’s data-first expectations regarding compliance
The FCA’s Consumer Duty is an outcomes-based approach, with the regulator requiring firms to demonstrate how they’re complying with regulations rather than prescribing specific methods. The regulation focuses on outcomes for customers and business conduct, which shapes the regulatory framework.
To demonstrate compliance, the FCA expects firms to show improvements in outcomes compared to previous practices, such as fewer customer complaints, selling only to appropriate customers, and better overall outcomes for customers. Firms have to manage and analyse vast amounts of data, including product-specific, client-specific, transaction data, how and why it changes over time etc, to achieve this. They must implement data-driven systems that consolidate and analyse the datasets to effectively utilise this data for compliance.
The Consumer Duty is a catalyst for firms to adopt data-driven compliance and assurance systems and require investment in technology.
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Effective Solutions for Demonstrating Compliance with Consumer Duty Outcomes
Regulatory solutions that leverage technology to facilitate compliance, can play a critical role in achieving the Consumer Duty outcomes. RegTech aims to reduce the burden on individuals in a company by embedding compliance into their core functions and providing guardrails that adapt to their activities.
This can be achieved by encoding rules into systems and monitoring data in real-time, allowing for the machine assessment of customer interactions and marketing communications. Potential issues will be flagged for review by higher skilled human teams. The ‘Human+’ technology combination is critical for achieving the breadth and depth of assurance required for consumer duty compliance.
Failing to adopt technology solutions can result in reduced assurance, as assessments become more time-consuming and complex, and data volumes increase. Firms should consider implementing a framework of data-driven technology solutions that collaborate to bring automation and specialists into a coherent model. Companies that recognise the opportunities for automation, efficiency, and new insights can derive significant competitive advantages beyond compliance.
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Technology solutions that be implemented together
Kore is a platform for product management and governance that offers real-time product data, digital audit trails, and management information. It serves as a single source of truth for the entire product lifecycle, providing valuable reporting for pricing and product outcomes and facilitating compliance demonstration.
Aveni automates the assessment of customer interactions, identifying potential risks, changes in circumstances, and indications of harm, and triaging them into human teams. It assesses Consumer Duty KPIs automatically, evaluating how your business is performing against the rules set out in your product management platform.
Together, Kore and Aveni enable businesses to capture and assess their performance for each product and customer journey, facilitating scalable and automated reporting for all consumer duty outcomes. Additional systems and processes, such as assessing marketing communications, may also be necessary. However, adding these tools to existing frameworks will be relatively easier and more accessible. These technologies can be quickly tested, implemented, and integrated at a low cost.
VERMEG puts systems in place to help you stay up to date with changing regulatory requirements and makes it 10 times faster to deploy new products, gain new business and update existing products. This low-code no-code platform provides firms with technical expertise and scalable and flexible solutions that adapt to their situation. It also help firms achieve cost reductions and time-to-market control in the modernisation of their information systems.
In conclusion, technology-driven solutions will be essential for firms to demonstrate compliance with Consumer Duty regulations set forth by the FCA. Given the sheer volume and unstructured nature of some of the most valuable data for these organisations, robust product and service governance platforms will be necessary. Monitoring and analysis capabilities will also be required to demonstrate the effectiveness of the processes and actions taken by the organisation to meet regulatory requirements. It goes without saying that leveraging technology is the most efficient strategy for ensuring compliance with the regulations.
Watch the full webinar replay here.
