RegTech for Consumer Duty: three steps to the starting line

The 31st July 2023 is a date firmly stamped in FCA regulated firms’ diaries: from then on, the Consumer Duty will be a regulatory reality for new and existing financial products and services.

But why is the Consumer Duty so hotly anticipated? Simply, because it’s a momentous shift to a much more assertive form of supervision by the FCA, meaning this date is not one that can be filed and forgotten – nor is it merely a finish line that’s just months away.

In reality, the 31st July 2023 is the starting point to a new evidence-based, outcome-focused era of regulation.

So, with that in mind, we’re highlighting three important steps that firms can take now to get themselves ready for that Consumer Duty starting line.

1. Prepare all team members for the change

By now, many firms will have working groups set up to tackle the changes in policy and processes needed to realign with the Duty’s more stringent oversight standards. And so, it’s more important than ever that everyone – across the entire business – understands why these changes are taking place, and how this will require a long-term behavioural shift, not just compliance with new processes.

The impact of these changes will be felt from board level to senior management, with the latter likely to oversee the Duty’s rollout and application in real terms. We also know that a cornerstone of the Duty is to provide support for vulnerable customers, so those colleagues in customer-facing roles will need to be trained to spot and identify those characteristics and provide suitable help.

2. Embrace data technology

The FCA has been clear that the Duty is going to be enforced in accordance with its cross-cutting rules. That’s why having oversight of all customer interactions will be a vital piece of the puzzle – allowing potential problems to be pinpointed early on, before they have the chance to crystallise into a serious breach of the Duty regulations.

Currently, it is a resource-heavy and costly task for QA teams to gain oversight of all their customer interactions, so random sampling is the only choice. But it’s becoming more and more clear that this won’t cut the Consumer Duty mustard.

The good news? There’s already a better way – by utilising data technology. The role AI and tech can play in overseeing all customer interactions could prove transformative for QA teams. By embracing the latest technologies, firms can fully review all customer interactions using AI, in turn focusing their human reviewers’ attention where it’s needed most based on the AI QA outcomes.

3. Move beyond random sampling

Firms that stick with random sampling alone run the risk of not understanding the true trends and context of their customer data and interactions, which ups the ante of not meeting the Duty requirements.

For example, a firm that receives 120,000 calls a month can only review a small percentage of these interactions – around 1,000 a month – through the random sampling method. It may detect a small proportion of problem calls using this small sample, but in no way can this paint a true or realistic picture across all interactions.

Under the Duty, having a better, more realistic grasp of your firm’s bad outcomes – by reviewing all the data available to you – will go a long way in helping you transform those bad outcomes into good, and reduce the potential for further bad outcomes in the long term.

After all, firms that embrace machine learning to achieve 100% oversight of all their customer interactions will be in an ideal position to proactively identify and rectify signs of risk or consumer harm – a component of the Consumer Duty that really matters.

Recordsure’s Conversation Intelligence solution is a unique platform for enhanced QA reviews, with AI QA models trained using 1,000s of hours of financial services-specific conversations. Our mortgage market model is based on best-practice frameworks.