How to solve the practical challenges of the Consumer Duty for your digital channels

The FCA’s Consumer Duty is set to transform the way in which financial institutions offer goods and services to customers by forcing them to place customer interests at the forefront of all interactions. The Duty will see firms needing to support customers openly and honestly to pursue their financial objectives while ensuring they implement reasonable steps to avoid foreseeable harm across all communication channels.

The Consumer Duty has completed two formal rounds of consultation, with the final rules being published at the end of July 2022. Little changed from the second draft consultation bar an extension to the implementation period from 9 to 12 months, landing the final deadline at the end of July 2023. The latest rules also came with an additional requirement for firms to produce implementation plans to be signed off by their boards at the end of October 2022.

This blog will examine the Consumer Duty’s cross-cutting rules and four key outcomes with a particular focus on their implications for firms’ digital engagement channels. We will highlight some of the practical challenges of compliance and demonstrate how firms can leverage technology to adhere to the new requirements.

The Consumer Duty

The Consumer Duty aims to strengthen the level of support firms provide to consumers across the entire engagement lifecycle, prescribing that consumers must be able to leverage their “channel of choice” to achieve their objectives (source). Institutions must act to “deliver good outcomes” to their customers through adherence to three cross-cutting rules and four associated outcomes (source).

The three cross-cutting rules which underpin how firms are to act in order to achieve the new Consumer Principle – Principle 12 (“A firm must act to deliver good outcomes for retail customers”), are as follows:

• Firms must act in good faith – this is a standard of conduct characterized by honesty, fair and open dealing and consistency with the reasonable expectations of customers.

• Firms must avoid causing foreseeable harm – take proactive and reactive steps to avoid causing harm to customers through their conduct, products or services where it is in a firm’s control to do so.
• Firms must support consumers to pursue their financial objectives – act proactively and reactively to put customers in a better position to make decisions in line with their needs and financial objectives.

These rules, together with the four outcomes, will help ensure customers receive good outcomes.

The four outcomes of the Consumer Duty are:

• Consumer support – Firms to provide support that meets ‘consumer needs.’ Can be achieved through communications within channels (e.g. through webchats).
• Consumer understanding – Information to be made available which helps consumers to make informed decisions.
• Price and value – Goods to be sold at a price that reflects their value.

• Products and services – Goods must be fit for purpose and match the demands of consumers.

Leveraging technology to overcome practical challenges

The Consumer Duty presents a number of practical challenges for firms to address, and with customers transitioning to digital channels faster than ever before, firms face added pressure to maintain compliance across these dynamic and complex platforms (source).

Many institutions will already have facilities in place to monitor, record and support user sessions across more traditional channels such as telephone, email or face-to-face. It is imperative that firms apply the same level of rigour to ensure their digital channels meet the new requirements. There are a number of considerations firms must therefore be aware of in the wake of the publication of the final rules:

• Record keeping – institutions must be able to demonstrate and evidence ‘good’ consumer outcomes, such as understanding, particularly where they have tested and enhanced communication in order to do so.
• Session monitoring – firms need to record and replay individual sessions to leverage behavioral insights and ensure that they provide a tailored approach to different audiences.
• Root cause analysis – firms need to be alerted to, and investigate, areas where consumers are struggling in the journey or potentially face harm to understand where certain aspects of the digital offering can be enhanced.

These issues have direct implications for firms’ digital channels and how they manage customers throughout their digital journeys. As a result, there are a number of core capabilities firms will need to implement as part of the Consumer Duty.

Monitoring and reviewing customer outcomes

Firms will be required to ‘monitor and regularly review the outcomes their customers are experiencing’ (source). As part of monitoring sessions, firms must be able to identify signs of customer vulnerability or harm. Novel solutions, such as those offered by Glassbox, allow firms to carry out checks and receive notifications that customers may be struggling before providing support in line with the Duty. Forensic recording enables firms to store and analyze live records of important digital sessions.

Using technology to monitor customer sessions also allows firms to offer real-time intervention and support, satisfying another requirement of the Consumer Duty. Artificial intelligence (AI) and machine learning (ML) algorithms are applied to session recordings, alerting firms to any signs that a customer may be struggling or acting erratically (e.g. clicking rapidly). This enables firms to give real-time support or intervention through, for example, offering a web chat pop-up. In the long term, automated monitoring and the capability to record sessions will assist firms’ first and second-line customer support teams to understand the customer journey and ensure that they are presenting information appropriately while acting and responding in a manner expected by the regulator.

Data collection and evidencing to The FCA

The Consumer Duty also outlines different ways in which firms can collect data on customer journeys, the collation of such data is critical if firms are to perform root cause analysis to better understand and act on customer complaints (outlined in Chapter 7 of the Consumer Duty guidance³). Firms are expected to be able to “derive data on customer journeys”. Maintaining this data and reporting evidence of real customer experiences to the regulator is therefore essential in enabling firms to undertake outcome testing (Chapter 9 of Guidance) to demonstrate that they are providing an ‘appropriate level’ of support.

Firms must consider whether they can currently meet the requirements of the Consumer Duty. If the practical challenges cannot be satisfied with their present operational procedures, firms should look to technology to ensure their compliance. Technology enables firms to be assured that customers are supported throughout their digital journeys, satisfying the cross-cutting rules and outcomes of the regulation.

To learn more, download our white paper, Solving the Practical Challenges of the Consumer Duty for Your Digital Channels.

How Glassbox can help

Glassbox’s Digital Experience Intelligence platform provides the capabilities to both monitor and capture sessions in digital channels, giving you a fast track to building your implementation plan. If you’d like to learn more about how Glassbox can help you meet the requirements of the Consumer Duty, you can request a demo.