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Influencing good outcomes: a proactive, analytics led, Consumer Duty monitoring framework

Adam Williams
Jul 24, 2023

As we approach the main Consumer Duty implementation deadline, we explore how firms can take a more strategic approach to meeting expectations and unlocking “by design” capability, to influence and pre-empt harms and poor customer outcomes.

With the July implementation deadline looming, The Financial Conduct Authority (FCA) have once again reiterated expectations of firms to not just implement, but embed, the Consumer Duty. But how can firms embed effective outcome monitoring to meet expectations?

The language from the FCA in its “10 key questions for firms to consider” is important – with questions worded to test what firms are “doing” rather than have “done”. It builds on the 4 priority shortcomings highlighted in its interim review of progress from January 2023, and reflects the expectation that day 1 of implementation is not about reaching a final goal, but having the capability ready to:

  1. Understand risks to customers, and undertake action to address this in how products and services are designed and distributed;
  2. Monitor what is happening in practice, to ensure this aligns with target outcomes and expectations for customers and consumer groups; and
  3. Demonstrate action taken to address areas for improvement and influence outcomes – and the consequential impact.

The extent to which firms can do the above, to reduce risk of ‘foreseeable’ harmful outcomes, will be the exam question set by the regulator as part of its scrutiny of firms post the implementation deadline.

Most of the action taken by firms has centred on answering point 1 above, including completing analysis and remediation planning for highest priority products and services. But when it comes to monitoring and intervention, firms risk falling back into a more traditional and reactive approach to tracking compliance – with a risk of missing harm.

Given the spirit and nature of the outcome focused Duty, this is likely to put them on the back foot in responding to regulatory questions. As the FCA says, “Once the Duty is in force we will prioritise the most serious breaches and act swiftly and assertively where we find evidence of harm or risk of harm to consumers”. We’ve seen recent interventions, including from the Bank of England to push firms to take swift action, to pass on the benefits of higher interest rates and address potential consumer harm.

There is also a risk beyond July that activity will commence on closed book reviews without proper consideration given to where frameworks and standards may need to be adapted to take a smarter approach to implementation – to reflect the additional complexity involved in this review.

So, what should be on the action plan for firms beyond July?

There are two key areas firms should be focusing on, if not already in plan.

  1. Taking a strategic approach to building outcome and impact focused monitoring and intervention capabilities – to influence outcomes and get on the front foot in answering any regulatory scrutiny.
  2. Conducting a centrally co-ordinated approach to “closed book” review strategy, to adapt and agree key business decisions on how to commence, before executing.

1. A strategic approach to monitoring and intervention – to be compliant by design

To meet the July deadline, most firms have focused on the traditional approach to MI – taking a set of business requirements and identifying existing or easily identifiable data points and KRIs to map against.

Firms should take a step back when reviewing how they have approached monitoring for Consumer Duty and ask themselves to which they are:

a) Aligned to the regulation and measuring (and evidencing) impact on outcomes of actions, not just events and inputs.

b) Generating action focused and targeted insights, not just passive MI without a clear link to actions required.

c) Integrated, with automation of monitoring and control (and testing) to be “always on” and adaptive to ongoing continuous improvement activity and underlying product and service changes.

d) Building predictive capability to pre-empt harm and poor outcomes and influencing customer outcomes through proactive, real-time delivery of business actions

By utilising more advanced analytics and AI to identify key behavioural triggers earlier, firms can generate insights to drive business action, and influence customer outcomes – with the ability to measure the impact of action, not just its completion. All without the need for unsustainable, manual and high effort control frameworks. This should shape the design of propositions to demonstrate an effective feedback loop and more importantly, avoid the risk of allowing customer harm to set in. It will also help meet regulatory expectations on firms to “harness the benefits of data and technology to improve their services and understand the outcomes they achieve for their customers”.

Capgemini have developed a Consumer Duty dashboard concept which we can deploy to help firms work through their monitoring framework maturity journey and meet the 4 key perceived shortcomings the FCA highlighted previously. We can help from accurately mapping regulatory expectations, sourcing data, to developing joint data and business led predictive (and proactive) capabilities that provide real insights on how firms are delivering good customer outcomes.

2. Closed Book planning

Whilst newly developed frameworks for the open book review will help in earlier clarification of expectations for business areas, a closed book exercise typically involves several risks and challenges, including:

a) A lack of documentary evidence on product features and terms – with limited expertise within the business to cover gaps.

b) Less well-defined servicing strategies, with limited journey and process maps

c) Incomplete and outdated product, transactional and customer data

d) Cross-over with dormant account processes

These will make it harder to comprehensively scope the closed book, accurately prioritise review activity and complete a thorough assessment to understand risks and the potential for harm. It is also likely that reviews will uncover historic issues with customer treatment which would require remediation.

Planning upfront to address these risks, have clear paths and upfront decisions in place to manage issues and deliver informed treatment strategies, will be critical in meeting the July 2024 deadline.

At Capgemini, we have been supporting firms from across the sector to embed the Consumer Duty in a strategic and sustainable way, to protect both their customers and their business. Please get in touch if you would like to discuss any of the points raised above.

Adam Williams

Director, Finance Risk and Compliance – Invent UK
Adam is the UK lead of Consumer Duty and Customer Vulnerability at Capgemini and a thought leader in helping clients develop compliant and customer focused strategies, using advanced data and technology solutions to adapt to emerging regulatory changes.