In July 2022, the UK's Financial Conduct Authority ("FCA") introduced the new Consumer Duty ("the Duty") in its Policy Statement. The Duty is the 'cornerstone' in the FCA's strategy of setting higher standards of consumer protection in retail financial markets. It puts further onus on companies to protect customers, namely retail customers. According to the FCA the three new rules coming into force are:
A new Consumer Principle that requires firms to act to deliver good outcomes for retail customers.
Cross-cutting rules providing greater clarity on the FCA’s expectations under the new Principle and help firms interpret the four outcomes: (i) the products and services outcome, (ii) the price and value outcome, (iii) the consumer understanding outcome, and (iiii) the consumer support outcome.
Rules relating to the four outcomes the FCA want to see under the Consumer Duty. These represent key elements of the company-consumer relationship which are instrumental in helping to drive good outcomes for customers.
The deadline to comply with the new rules will be on a phased basis. For new and existing products or services that are open to sale or renewal, the rules come into force on 31 July 2023. And for closed products or services, the rules come into force on 31 July 2024.
This regulation impacts a mix of companies and groups, including:
Regulated companies, including those in the e-money and payments sector
Consumer organizations and individual consumers
Industry groups/trade bodies
Policy makers and regulatory bodies
Industry experts and commentators
Academics and think tanks
This blog post is here to help you navigate components of this new framework. While we don’t purport to have all the answers, we hope this guide helps you on your compliance journey. We’ll talk about how first party customer data and a Customer Data Platform can be the cornerstone in your efforts to meet the new regulations.
For a full deep dive into ‘the Duty’ we recommend reading this guide.
Key elements of the regulatory change
There are three key elements of the regulatory change that rely on customer data, so we’ll be focussing on those:
The consumer understanding outcome
The customer support outcome
The consumer understanding outcome
According to the FCA, companies must focus more on consumer outcomes throughout the customer journey. In particular, making sure communication is personalized for some customers, including those with characteristics of vulnerability. So, companies must assess what data they are collecting to ensure that this is possible.
This requirement is broader than other legal requirements like the Consumer Credit Act 1974, and applies to all communications provided to consumers — e.g. verbally, online, in letters, or product terms and conditions.
The customer support outcome
This is all about the support you provide to customers and monitoring the quality of support to ensure certain standards are met. For digital-only customer support, companies must ensure that their systems work correctly, consider how they will deal with non-standard issues like fraud, have measures in place to ensure operational resilience, and take extra care for vulnerable customers and those with changing needs.
The FCA has highlighted that ‘the Duty’ requires companies to focus on the needs of customers in vulnerable situations and those with certain protected characteristics. To do this, companies must:
Understand the needs of their target market/customer base
Make sure staff have the right skills and capability to recognise and respond to the needs of vulnerable customers
Respond to customer needs throughout product design, flexible customer service provision, and communications
Take additional care to ensure vulnerable consumers receive outcomes that are as good as for other consumers
Monitor and assess whether they are meeting and responding to the needs of customers with characteristics of vulnerability, and make improvements where this is not happening
In summary, the new legislation requires organizations to have a thorough understanding of their customers, knowing who they are and how they interact with your products and services. This is especially important for vulnerable customers, in order to ensure the outcomes they experience are not worse than outcomes for non-vulnerable customers. Finally, experimentation and measurement of all outcomes is required, so that customer experiences and outcomes can be improved.
How can a Customer Data Platform (CDP) help navigate this new regulation?
Twilio Segment empowers businesses to establish a modern customer data foundation and achieve a complete view of their customers. With Segment, businesses can capture customer data at every touchpoint, enrich customer profiles, unlock customer insights, make data driven decisions, and deliver unified, personalized customer experiences.
Part of ‘the Duty’ is about knowing who your customers are, so you can tailor communications to them and provide optimal customer support. If you don’t have a solid data foundation in place, this will seem like a tall order. But implementing a CDP, like Segment, enables you to capture customer data from a plethora of sources, centralize that data, and make it available to all downstream tools used by customer facing teams and analytics. This way all relevant teams will have a complete view of your customers, including characters of vulnerability, which is paramount in this new regulation.
Collecting and combining the right data also helps enhance your digital products, especially for vulnerable customers. When you have the full view of all customer touchpoints, you can use the data to answer questions like:
How can we identify whether the website or application is supporting vulnerable customers in the best way possible?
How do you measure the impact of a change to the website or application on customer outcomes?
Let’s walk through an example. Suppose you want to understand whether vulnerable customers are successful in navigating your app for basic functionality, or whether they frequently call the contact center for support with basic tasks.
In order to understand this, you would need to capture all behavioural data from your application, combine it with data from the contact centre, and look at the relationship between the two. These are often disparate, siloed sources of data, but a CDP can combine these data streams in real-time, to drive analytics and even trigger real-time actions off the back of a sequence of events.
With the data streams combined, you could answer the following questions:
Do vulnerable customers tend to call the contact centre more often than others?
Is a website user or an app user more likely to call the contact center?
Is there a pattern of behaviour we see before they call the contact center?
Are there certain topics viewed moments before they call the contact center?
Did recent changes to the website or app impact the customer outcomes? What about vulnerable customers?
Uncovering deep, impactful insights is just one case of combining data with a CDP, but it is even more impactful when the data is used to drive real-time actions, to personalize the customer experience and move the needle on customer outcomes.
Personalizing and optimizing communication across the customer journey
Once you have the right data foundation in place, with an understanding of who the customer is, and where they are in their customer journey, you can tailor the communication and customer experience accordingly.
With a CDP, communication can be personalized across all channels, in a joined up, coherent way, regardless of the activation tool used to deliver the message. That is the power of a CDP, to collect data from all sources, use that information to inform communication strategies and distribute audiences and journeys across any tool the business uses.
Let’s continue the example of the vulnerable customer who’s navigating the app before calling the contact center. With a complete understanding of the customer, such as their vulnerability status, and their behaviour across all digital touchpoints, such as whether they currently have a case open, you can personalize the app experience to ensure sure the information and overall experience enables them to make well-informed decisions, and increase the likelihood of positive outcomes.
You can do this with Twilio Engage to deliver unified, personalized customer experiences at scale. To optimize and tailor communication, you can use Journeys and randomized splits, within Engage, to experiment with different communication channels, content and timing, ensuring you achieve the best possible outcomes for your customers.
Track customer support
Customer support is often offered across a variety of channels — in-app, live chat, Email, contact centers, text message, or in branches. By capturing data from all of these channels, companies can better understand the customer support needs and relationship between the channels. For example, how frequently users follow the in-app support channel, only to call the contact center the same day. Having all this information available to your analytics team ensures you can better understand these relationships. It can also help you identify which channels are sufficient or working well for vulnerable customers.
Recognize, observe, and assess
An important element of centralizing the collection of customer data is democratizing it to your customer support teams so that they can provide the best possible support. For example, using Profiles Sync you can display relevant information that may be in your data warehouse, such as vulnerability status, to your customer support team in your contact center, like Flex. Outside of vulnerable customers, you can also anticipate customer needs through their interaction with your help center or website. For example, if a customer has read the claims process in your customer portal, the CS agent can anticipate when they call next that it might be to make a claim. And lastly, by capturing every touchpoint and customer outcome with Segment, you can better understand which customers are experiencing negative outcomes and take action.
With the introduction of the Financial Conduct Authority's new Consumer Duty, companies must take a more proactive approach to meeting the regulator's high standards. And a CDP can be a powerful tool to help navigate the new rules by helping you capture customer data, personalize and optimize communication, track the health of your customer support, and provide the best experience for customers, particularly those who are considered vulnerable.
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