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The countdown to Consumer Duty compliance begins

Extensive speculation about the final rules for the Financial Conduct Authority (FCA)’s new Consumer Duty has been bubbling across the sector for months. With the FCA’s plans now confirmed, there are important dates for regulated businesses to not only note, but act by too, with the first being just weeks away.

Through the Consumer Duty, the FCA is fortifying its commitment to becoming a more assertive and data-led regulator. By 31st October 2022, it has stipulated that its members’ boards (or equivalent) must have an agreed implementation plan in place detailing how they’ll meet the Consumer Duty’s fundamental principles, with improving customer outcomes at its core.

Nine months later, on 31 July 2023, the Consumer Duty rules will come into force for new and existing products or services. A year later, these same rules will apply to firms’ closed products and services.

Consumer Duty compliance: firms will need to step up their oversight strategy

With this swift and challenging timeline looming, the responsibility for firms to become wholly compliant whilst embracing higher and clearer standards of consumer protection can seem overwhelming.

EY found in a recent poll that nearly 90% of UK firms said Consumer Duty compliance was a top regulatory priority. However, 80% of respondents were concerned about how they can sufficiently evidence good outcomes.

So, what does the Consumer Duty mean for QA teams, and what practical steps can firms take to get ready?

Businesses will be mandated to actively work to ensure their customers achieve positive results from their services. Fair treatment for all is a consistent thread that flows through the Duty’s three new Cross-Cutting Rules:

1. Act in good faith towards retail customers
2. Take reasonable steps to avoid causing foreseeable harm to retail customers
3. Take reasonable steps to enable and support retail customers to pursue their financial objectives

Firms will be expected to demonstrate these rules across four key outcomes: customer understanding, products and services, customer support and price and value.

Simply put, it’ll be as important to encourage positive customer outcomes as it is to eliminate negative ones.

Olivia Fahy, Senior Product Manager at Recordsure, explains:

“The Consumer Duty is top of the agenda for many FCA regulated firms, as the recent EY poll suggests. With just over ten-weeks until boards will need to agree their implementation plans and maintain oversight of their delivery, it’s an opportune time for businesses to consider how RegTech can help them achieve Consumer Duty compliance and deliver on the Duty’s outcomes.

“The interactions that take place in customer conversations are where many of the risks lie in creating consumer harm, leading to poor outcomes, making post-conversation QA a crucial area of focus for firms to consider under the new Consumer Duty. The FCA has made clear that it wants firms to innovate in the interests of their customers, so rethinking outdated operational practices to eliminate risk and deliver better outcomes is of paramount importance.

“To meet the high standards of the Consumer Duty, firms can either invest in more people, or invest in tech to create efficiencies that enable their people to spend their time more productively on what matters – ensuring great customer outcomes. 

To meet the high standards of the Consumer Duty, firms can either invest in more people, or invest in tech to create efficiencies that enable their people to spend their time more productively on what matters.

Olivia Fahy, Senior Product Manager, Recordsure​
olivia fahy senior product manager recordsure

 

“Using Artificial Intelligence (AI) powered tools such as Recordsure’s ConversationReviewAI for post-conversation compliance reviews provides firms with the ability to move away from random sampling c.5% of their customer interactions to a targeted, risk-based approach to QA, helping drive improved controls, oversight and automation.

“The FCA is moving towards a ‘show me, don’t tell me’ approach meaning supervisors will want to see evidence of how firms are monitoring and reviewing customer outcomes. QA teams can futureproof their operations and compliance with the introduction of post-conversation Compliance Analytics.”

Download our whitepaper to learn how post-conversation Compliance Analytics can help FCA-regulated firms meet their Consumer Duty obligations.

Consumer Duty Compliance with Recordsure RegTech

New Consumer Duty: from October 2022 implementation planning to going ‘live’ in July 2023

The wait is over, after over a year of debate, speculation and rumours from all corners of the industry, the regulator has now set out the formal set of rules for its long-touted Consumer Duty legislation.

First formally proposed in May 2021, the Consumer Duty, as published on 27 July 2022, effectively supersedes the previous Treating Customers Fairly (TCF) framework with a more dynamic and proactive approach to regulation – described by the FCA as ‘assertive supervision’.

Our rules require firms to consider the needs, characteristics and objectives of their customers – including those with characteristics of vulnerability – and how they behave, at every stage of the customer journey. As well as acting to deliver good customer outcomes, firms will need to understand and evidence whether those outcomes are being met.

FCA

The newly introduced rules and outcomes focus on four key areas: products and services, price and value, customer understanding, and customer support – bringing customers to the forefront of everything financial services firms do.

So what are the new rules?

  • A new Consumer Principle that requires firms to act to deliver good outcomes for retail customers. 
  • Cross-cutting rules provide greater clarity on FCA’s expectations under the new Principle and help firms interpret the four outcomes.
  • The Consumer Duty Rules relating to the four outcomes represent critical elements of the firm-consumer relationship, which are instrumental in helping to drive good outcomes for customers.

The Consumer Duty is the most transformative regulatory shift we've seen from the regulator over the past decade – and the focus on better customer treatment will be welcomed by the consumer.

Joe Norburn, CEO at Recordsure and TCC

FCA’s clarity on their expectations and firms’ focus on customers’ needs is expected to pay the way to more flexibility for firms to compete and innovate in the interests of consumers. 

FCA introduces challenging deadlines

Placing emphasis on accountability and transparency, the move is intended to put the consumers’ best interests at the heart of every decision that gets made within financial services – and fundamentally improve how firms serve consumers. And crucially, the guidance redefines firms’ obligations towards customers to recognise the growing number of risks posed by our increasingly digitised marketplace.

Hence fast action is required.

Along with the launch of the new Customer Duty rules, FCA announced very challenging timescales; here are the key dates for the financial industry:

  • 31 October 2022: Boards (or an equivalent management body) are required to have an implementation plan
  • 31 July 2023: new Consumer Duty rules come into force for new and existing products or services open to sales or renewals
  • 31 July 2024: rules come to force for closed products and services  

With the challenging deadlines, the financial industry has been put under pressure to deliver the implementation plans this October and follow through to the Consumer Duty implementation deadline of July 2022.

David Boyhan, Technical Director at TCC

As previously promoted, FCA is keen for firms to implement the new regulations as quickly as possible, and the rules will come to force at the end of July 2023 – a year away.

Yet a new deadline of 31 October 2022, announced today, is already looming with firms being required to have implementation plans in place – so as of this morning, the development of a compliance framework that’s fit for purpose has immediately become the top priority for business leaders.

The good news for firms is that consultancy specialists, such TCC, are already geared up to help them achieve the challenging deadlines of the implementation planning, oversight and delivery.

David Boyhan, Technical Director at TCC

A quick Consumer Duty recap

Setting the bar for consumer care higher than the existing Principle 6 and 7 of the FCA handbook, an overarching Consumer Principle underpins the legislation: ‘A firm must act to deliver good outcomes for retail customers.’

The Duty – as stated by FCA – will include requirements for firms to: 

  • end unfair charges and fees 
  • make it as easy to switch or cancel products as it was to take them out in the first place 
  • provide helpful and accessible customer support, not making people wait so long for an answer that they give up 
  • provide timely and clear information that people can understand about products and services so consumers can make good financial decisions, rather than burying key information in lengthy terms and conditions that few are inclined  to read 
  • provide timely and clear information that people can understand about products and services so consumers can make good financial decisions, rather than burying key information in lengthy terms and conditions that few are inclined to read  
  • provide products and services that are right for their customers 
  • focus on the real and diverse needs of their customers, including those in vulnerable circumstances, at every stage and in each interaction 

The final component of the Consumer Duty comprises four outcomes that firms must consistently strive to deliver:

  1. Consumer Understanding: Understandable, easy-to-follow communications that genuinely help customers make informed decisions
  2. Products and Services: User-friendly products and services that are designed to meet customers’ needs and offer fair value, taking behavioural biases into account
  3. Consumer Support: Offering support to the customer needs when they need it with Customer Service that works for all customers across all mediums and platforms, taking into account vulnerability
  4. Price and Value: Fairly priced products and services that deliver true value to customers

Now's the time for action

Whether your firm began planning at first notice or elected to await further instruction before embarking on such a major strategy realignment, with the final rules upon us, there’s no more time to wait: implementation planning starts now.

Your first port of call should be to map out how the Consumer Duty’s aims and conduct requirements will make sense with your own products and services. At the same time, it’s critical to begin preparing for the switch to a more outcomes-focused model of supervision – including assessing how your current outcomes testing and complaints handling processes can be retooled to fit the Cross-Cutting Rules and Four Outcomes.

And beyond that, the sheer scope of the new legislation means your entire product lifecycle will likely need an honest review. This means asking some fundamental questions, such as:

  • How do you demonstrate that your products are truly designed to meet customers’ needs? 
  • Can you be sure they offer value for money? 
  • How do your communications help customers – for instance, is your website user-friendly, and are there multiple channels of communication on offer? 
  • Could you be doing more to support consumers to realise their financial goals?

Futureproof your Consumer Duty compliance with RegTech

Whatever stage of planning you’re currently working on, it’s clear that ensuring a smooth transition will require considerable time, attention and resource from even the most well-prepared team.

We work with TCC’s subject matter experts who can provide you with an impartial, detailed health check of your approach to root out any inefficiencies or blind spots that prevent you from operating a well-oiled machine from day one – whilst ensuring your processes are flexible and robust enough to adapt to future regulatory directives. What’s more, they are well versed in implementation planning, delivery and oversight, providing you with a springboard for the successful delivery of the Consumer Duty.

What is more, RegTech is set to play a critical role in helping firms to ensure Consumer Duty’s compliance implementation. With invaluable tools like Recordsure Voice and Docs that monitor and review customer interactions and provide firms with actionable insights, you can be sure to introduce greater oversight for all customer-firm conversations and introduce vital audit trails, thus setting you up for a compliant future.

 

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How RegTech can help mortgage providers better manage customer safeguarding, consumer duty challenges and cost of living crises

For mortgage providers, customer safeguarding has never been more critical

With its incoming Consumer Duty legislation, the FCA is set to transition to an ‘assertive supervision’ approach to regulation – signalling a greater willingness to challenge firms and intervene when service providers’ practices and processes are failing to deliver satisfactory outcomes.

But more broadly, the initiative seeks to bring about a shift in culture across financial services, placing a pronounced emphasis on innovation alongside the requirement that businesses place customers’ needs and financial health at the centre of all decision making.

The reinforcement of customer safeguarding would simply be considered a noble goal in any calmer economic climate. Yet as the country continues to grapple with an unprecedented cost-of-living crisis, these timely extra measures may prove to be a vital lifeline for many struggling consumers.

And this is no more apparent than in the high-stakes mortgages arena, where rising repayment costs are not just making wallets feel conspicuously lighter but in all-too-many cases jeopardising the fundamental security of the family home.

Mortgage payments climb to unsustainable levels

With the cost of living continuing to spike, nearly every aspect of consumers’ financial lives are being put under increasing strain – a Which? study found that more than two million households self-reported missing or defaulting on a key financial payment last month.

Research by L&C Mortgages indicated that mortgage rates have, in some cases, tripled during the first half of 2022 – with a standard monthly payment on a £150,000 mortgage increasing by a full £100. This means homeowners already struggling with other essentials are having to find an extra £1,200 per year just to hang onto their homes. And this upward trajectory shows no signs of stopping anytime soon.

Two million households self-reported missing or defaulting on a key financial payment last month - which doesn't come as a surprise with mortgage rates, in some cases, trippling during the first half of 2022.

Many customers may be looking to switch to a more affordable deal to ease the escalating burden on their bank balance and avoid entering arrears. Others may be in a hurry to re-mortgage their properties with long-term fixed rate arrangements to cut the effects of further inflation off at the pass.

Whatever their initial thoughts on how to proceed, it’s vital that advisers remember a mortgage is the most expensive investment the average consumer will ever make. That’s why they need to be in no doubt that the consumer has fully taken note of and understood the information provided to them.

Indeed, in the spirit of the fast-approaching Consumer Duty, now’s the time to start going the extra mile to confirm your recommendations are genuinely in the customer’s best interests. Because at this point, the last thing consumers need is to be offered unsuitable advice – that could lead to further financial hardship – due to elements of risk being left unverified during discovery.

Recordsure’s AI Voice offers a vital extra line of defence

Powered by the latest technology of AI and Machine Learning, Recordsure’s AI Voice platform lets firms record and automatically segment 100% of customer interactions by conversation topic, allowing your team to zero in on specific risk points. For example, you can review the bereavement status, total savings or salient health issues – and ultimately complete quality assurance call reviews in half the time. Our next-generation speech analytics tool then scores each call, eliminating the blind spots that inevitably arise from manual sampling alone.

In times of surging demand, it’s more crucial than ever to know where to deploy your finite human resource. That’s why AI Voice was meticulously designed to remove the guesswork from your compliance processes, so you can focus your human team’s attention on the cases that are most in need of review. With this RegTech tool, you are able to tackle up to 20 times more high-risk calls per day with the same personnel.

In times of surging demand, it's more crucial than ever to know where to deploy your finite human resource. That's why it's so important to remove the guesswork from your compliance processes and focus your human team's attention on the cases that are most in need of review.

And thanks to our unique artificial intelligence-based approach to risk identification, featuring our best-in-class analytics platform trained on over 2,000 hours of high-quality audio data, you’re much more likely to unearth any recurring issues negatively affecting consumer outcomes than by selecting sample cases at random.

Next-generation MI for better customer outcomes

With a comprehensive archive of past interactions and post-call MI, AI Voice gives your customer-facing staff the tools they need to drive consistently better outcomes. It also provides vulnerable consumers with the most suitable possible path forward by learning from specific examples of best practice.

Recordsure RegTech tool ebles you to tackle up to 20 times more high-risk calls per day with the same personnel.

Where once your call centre teams would rely on case studies or hypothetical training exercises to hone their customer support skills, your staff will have access to a repository of their own real-life, risk-scored calls to identify where improvements could be made in their approach and risk management strategies.

Not only will this help your customers resolve their financial difficulties as quickly and efficiently as possible but optimising your service through tech-enabled insights will truly set your business apart at a time when consumers are looking for a provider they can trust.

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Consumer Duty: What we know so far and how next-generation RegTech can ease the compliance burden

With its focus on encouraging firms to take a bolder and more dynamic approach to customer care, the Consumer Duty aims to increase the standard of protection and safeguarding given to consumers across financial services.

Beyond simply treating customers fairly, the FCA will now expect regulated businesses to take a more proactive role in helping customers reach their financial goals, envisioning a market where businesses ‘compete vigorously in the interests of consumers’.

Firms will therefore need to ensure consumers’ best interests and wellbeing are placed at the heart of each aspect of the business lifecycle – from the initial product development phase right through to how customer service interactions are handled on a day-to-day basis.

What does the Consumer Duty hope to achieve?

Consumer Duty Image of Busy People Crossing Road

In many ways, a more forceful reboot of the existing ‘Treating Customers Fairly’ (TCF) guidance, the Consumer Duty will compel businesses to go beyond the current FCA handbook’s Principle 6 of ‘paying due regard’ to customers’ needs. And instead, it makes this the primary focus of all governance and decision making.

It’s hoped this shift in priorities will lead to tangible improvements in the customer’s experience, as well as help the regulator achieve a number of its broader, long-held goals for the industry, including:

  • Raising and re-enforcing conduct standards
  • Ensuring products and services are truly ‘fit for purpose’ and provide fair value
  • Preventing customers from experiencing harm
  • Driving an outcomes-focussed approach to helping customers
  • Preventing sludge practices
  • Empowering consumers to participate in financial markets confidently
  • Supporting customers when navigating unfamiliar environments
  • Continuing the push for positive culture change
  • Championing Diversity & Inclusion within firms’ employee and customer bases
  • Restoring consumer trust in the financial services industry

What are the FCA’s expectations for firms?

Despite its game-changing ambition and clear step up in regulatory expectations, the FCA has confirmed it won’t be taking a prescriptive approach to how the Consumer Duty rules should be implemented. Instead, firms will be able to decide how they can be best applied to their own business model.

However, the Cross Cutting Rules make it clear that businesses will be required to:

1. Act in good faith towards retail customers
2. Take reasonable steps to avoid causing foreseeable harm to retail customers
3. Take reasonable steps to enable and support retail customers to pursue their financial objectives

In preparation, businesses should take another look at their end-to-end customer journey and assess how it could be improved to better serve their needs. Start by putting yourself in the consumer’s shoes and ask the fundamental questions such as ‘do our products provide value for money?’, ‘are our communications clear, understandable and not misleading?’ and ‘as a customer, would I be happy to be treated in this manner?’

Beyond that, your internal governance processes will need reviewing to ensure they’re compliant with your new obligations. The same goes for your complaints handling procedures: for instance, do they genuinely go far enough to identify and address the root cause of adverse outcomes?

Start by putting yourself in the consumer’s shoes and ask the fundamental questions such as ‘do our products provide value for money?’, ‘are our communications clear, understandable and not misleading?’ and ‘as a customer, would I be happy to be treated in this manner?’

Indeed, it’s clear that the FCA is expecting firms to step up the amount of process and outcomes monitoring they conduct on an ongoing basis. Above all, the legislation will place the onus on businesses to be proactive in amending aspects of their business that yield unsatisfactory results for customers – whether it’s a specific product or service, ambiguous marketing messaging or inefficient communications channels.

And so, equipping yourself with the right tools to monitor, review and evidence customer interactions will invariably be a vital component of any successful Consumer Duty strategy.

Easing the compliance burden with next-generation RegTech

It’s no secret that implementing the Consumer Duty will require a lot of time and effort for even the most well-prepared business. And once the implementation phase has passed, staying on top of your obligations is likely to add a considerable strain to already-busy compliance teams.

That’s why firms are increasingly looking to the power of innovative technologies and RegTech to relieve the pressure. By leveraging AI, machine learning and smart automation, you can free up valuable human resources for where it’s truly needed, maintain a complete record of client interactions and benefit from an extra line of defence against human error.

With Recordsure’s market-leading AI Voice speech analytics platform and AI Docs document suite, you can:

1. Ensure processes adherence and regulatory compliance
2. Catch emerging risks early
3. Keep an automatic audit trail
4. Futureproof your business activities

In preparation, businesses should take another look at their end-to-end customer journey and assess how it could be improved to better serve their needs. Start by putting yourself in the consumer’s shoes and ask the fundamental questions such as ‘do our products provide value for money?’, ‘are our communications clear, understandable and not misleading?’ and ‘as a customer, would I be happy to be treated in this manner?’

Beyond that, your internal governance processes will need reviewing to ensure they’re compliant with your new obligations. The same goes for your complaints handling procedures: for instance, do they genuinely go far enough to identify and address the root cause of adverse outcomes?

Indeed, it’s clear that the FCA is expecting firms to step up the amount of process and outcomes monitoring they conduct on an ongoing basis. Above all, the legislation will place the onus on businesses to be proactive in amending aspects of their business that yield unsatisfactory results for customers – whether it’s a specific product or service, ambiguous marketing messaging or inefficient communications channels.

And so, equipping yourself with the right tools to monitor, review and evidence customer interactions will invariably be a vital component of any successful Consumer Duty strategy.

Find out how RegTech can take your Consumer Duty plan to the next level.

Recordsure-collection-recoveries-cost-of-living-crises

Two million missed payments and counting: how prepared are your Collection & Recoveries teams for the realities of cost-of-living crises?

Why technology is the critical element when equipping your C&R function to handle the inevitable influx of new calls better

When the ongoing rapid rises in the cost of food, transportation and energy first began early this year, many commentators were quick to warn we’d see an eventual avalanche of individuals struggling with their finances. And six months on, the most recent data suggests that – for an increasing cross-section of UK customers – the squeeze may have finally reached the breaking point.

A new study by consumer organisation Which? has revealed that approximately 2.1 million households reported missing or defaulting on at least one mortgage, rent loan, credit card or bill payment in June. The Office for National Statistics (ONS) also noted that an alarming 88% of UK households experienced a rise in their cost of living during the same month.

It’s no surprise, then, that the consumer confidence is now at its lowest point since early 2020 – a time when the government had just shut down huge swathes of the economy entirely as the pandemic hit British shores. Consumers are becoming more fearful that a recession is around the corner – and with inflation continuing to spiral and fuel costs steadily creeping up, they’d be forgiven for assuming there’s little relief on the horizon.

So, just how concerned should we be about public morale?

The cost-of-living crisis: what do consumers think?

According to Which? research, more than three-quarters (78%) of British consumers are convinced the UK’s economic climate is set to deteriorate further over the coming year, with the number optimistic of a recovery dwindling to just 8%. This amounts to a net confidence rating of -70 for June, a stark decline from the -47 recorded one month prior.

But beyond the big picture, perhaps of even greater concern is the downward trend in the public’s perception of their individual financial security the longer the cost-of-living crisis continues. The latest polling found that confidence in future household finances dipped a full 12 points from May to June alone, dropping from -28 to -40.

mum-and-daugther-shopping-collection-recoveries-cost-of-living-crises

In fact, a recent study by Abrdn Financial Fairness Trust and Bristol University estimates that as many as 4.4 million households across the country – around one in every six – could now be facing ‘serious financial difficulties’ as a direct result of the price rises.

The real-world consequences of inflation

In June, a majority of all consumers polled (58%) reported having to adjust their financial decisions due to the increase in prices, including cutting back on essential purchases or breaking into their savings to afford payments. This figure is comparable to the previous two months but represents a significant raise from 40% just one year ago – highlighting how severely the situation has escalated since the new year.

These findings also corroborate with a survey conducted by BBC in May, which indicated that as many as 56% of households are buying fewer groceries and going without basic necessities as the purchasing power of their hard-earned cash weakens on a seemingly weekly basis.

It’s important to note that the cost-of-living difficulties don’t discriminate. Whilst it’s unfortunately true that those on lower incomes are naturally baring more of the brunt – with around two-thirds of those on incomes of £21,000 or lower saying they’ve had to make at least one financial adjustment -consumers across all ages, income levels and regional areas are being impacted.

56% of households are buying fewer groceries and going without basic necessities as the purchasing power of their hard-earned cash weakens on a seemingly weekly basis.

BBC Survey, May 2022

For example, the majority (57%) of households earning more than £55,000 admitted to making at least one financial adjustment for June. Indeed, if the Abrdn/Bristol research is any indication, the only group currently facing fewer financial difficulties since October 2021 are households with annual incomes greater than £100,000.

Now more than ever, customers need help they can trust

With the stakes now so high for so many, firms simply can’t afford to drop the ball with how they deal with vulnerable consumers. As more and more people turn to financial professionals for help, it goes without saying that the spike in consumers looking for assistance will be most readily felt by the staff with the closest interactions with the public.

As more and more people turn to financial professionals for help, it goes without saying that the spike in consumers looking for assistance will be most readily felt by the staff with the closest interactions with the public.

From your customer service operators to your collections and recovery teams, your entire firm should not only be prepared for a spike in calls and enquiries but also re-familiarise themselves with their regulatory obligations towards ‘at-risk’ individuals.

As always, you should strive to treat consumers with the utmost dignity, compassion and respect as you help them navigate the difficult next steps ahead – whilst providing them with as much information (and as many options) as possible so they can choose the path most suitable for them.

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Additionally, you’ll need to ensure you’ve got a robust quality review and assurance processes in place to help root out inefficiencies and pinpoint the root cause of any subpar outcomes at the earliest possible convenience.

Innovative RegTech solutions such as Recordsure AI Voice speech analytics that review, score and offer actionable insights for all customer interactions can play a key role in this regard. The superior RegTech allows you to review and continually optimise your processes by automatically flagging areas of regulatory concern as they arise. Hand in hand with TCC tech-powered case reviews for document reviews and audit trails, these technologies offer unique tools for compliance reviews, risk management and conduct monitoring while achieving greater efficiencies and productivity.  

Furthermore, with a comprehensive archive of client interaction recordings and documentation, you’ll benefit from deep MI into both where improvements can be made, and where your resource can be most effectively deployed to assist your consumers when it truly counts.

The superior RegTech allows you to review and continually optimise your processes by automatically flagging areas of concern as they arise.

Benefits include better management of compliance reviews, risk and conduct monitoring, while achieving greater efficiencies and productivity.

Discover the tools you need to combat the cost-of-living crisis

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Leveraging technology to address the impact of the cost-of-living crisis on your collections portfolio

There’s a perfect storm brewing in the UK, a potent mix of soaring inflation, stagnant wages and growing energy, food and transportation costs – all leading to a cost-of-living crisis that will unleash hardship on millions of households across the country. And the time to act is now.

In his recent Spring Statement, Chancellor of the Exchequer Rishi Sunak announced government measures to support UK families and SMEs with the steep spikes in National Insurance, fuel, energy and housing costs.

The statement paints a bleak picture: ‘Higher than expected global energy and goods prices have already led to an unavoidable increase in the cost of living in the UK…with the long-term consequences not yet clear.’

This means that ordinary people across the earnings spectrum in the UK – working professionals, entrepreneurs, parents, new homeowners, students, young families and pensioners – are anxious about how they’ll make ends meet this year. As a result, they may find themselves resorting to reduced savings, borrowing, payday loans, or simply not knowing how they’ll cope.

An inevitable consequence of the added financial pressures falling on the shoulders of ordinary and even vulnerable people is the downstream demand on your compliance, collections and recoveries teams when it comes to supporting your customers.

Read on to find out how your organisation can tackle this momentum and prepare your teams with tools and smart tech to reassure and serve your customers in the face of the cost-of-living crisis.

Another challenging year ahead

Off the back of the repercussions of the global pandemic, it’s clear that the UK public is in for even more financial pressure and uncertainty: ‘Higher global energy, metals and food prices…pose risks to the outlook for inflation, consumer spending and production. [This] will inevitably have an adverse effect on the UK economy and the cost of living in the short term,’ states the Spring Statement 2022.

And your customers are already feeling the pressure. 95% of UK adults are worried about the increasing cost of living this year, with cost rises in energy, food and phone and internet bills causing the most anxiety, according to a new survey by Royal London.

You should expect to see a sharp increase in the percentage of customers in financial distress and, consequently, an influx of call volumes and an even higher workload demand on your collections and recoveries teams.

Garry Evans, Chief Product Officer, Recordsure
Garry Evans b&w

But despite the government’s support pledges, these policies alone, such as the 5p temporary reduction in fuel tax and the permanent increase in NICs primary threshold, won’t alleviate the financial burden on your customers – particularly the most vulnerable groups.

Barret Kupelian, senior economist at PwC, said: ‘This is not enough given the large terms of trade shock the UK and other economies are facing. Households are under unprecedented pressure. The OBR’s forecasts confirmed that household real disposable income per person is expected to contract at its fastest pace for at least the last 65 years, shrinking by more than 2%.’

And the data tells the same story. Kupelian said: ‘We expect energy prices to continue to drive the inflation story in the coming few months. The latest data shows the energy price cap could be due for an additional one-third increase in October this year after the approximately 50% increase pencilled in for next month.’

What does this mean for your collections and recovery teams?

A staggering 90% of adults plan to make spending changes due to the cost of living crisis. As the financial situation becomes direr for your customers, particularly those most vulnerable, they will struggle to make ends meet and will find themselves in a difficult position to choose between petrol for the car or food on the table. Given the challenges your customers are facing over the next year, how will this impact your organisation, particularly your customer-facing teams?

First of all, you should expect to see a sharp increase in the percentage of customers in financial distress and, consequently, an influx of call volumes and an even higher workload demand on your collections and recoveries teams.

As your support teams are inundated with more customer inquiries, it’s inevitable that maintaining good quality service and compliance will become a risk to the business.

Research has stated: ‘Survey respondents expressed significant concerns about an increased risk of compliance failures as a result of the pandemic. The assessment that the pandemic somewhat increased the risk of failures was shared by 67% of respondents, and another 10% felt it greatly increased.’

Image of handsome unshaven young man wearing eyeglasses looking out window while resting in bright modern cafe

How can you prepare?

The good news is that there are a couple of actions you can take to prepare for the imminent cost-of-living crisis and to equip your teams to better serve your struggling customers.

  1. Choose efficiency over effort

Despite the digital disruption across industries over the past decade, collections and recoveries teams haven’t seen the same level of investment that other areas of your business might have. The ability of machine learning and artificial intelligence to streamline your team’s manual, time-consuming quality checks tasks means that you’ll quickly begin to notice cost savings and higher standards immediately.

Recordsure’s intelligent speech analytics tools can help your compliance team move away from a random sampling methodology – where maybe 3 in every 100 calls reviewed have issues to deal with – to a targeted, risk-based approach that will make them more than 20 times as effective and reviews being more meaningful, with >60 in every 100 calls reviewed identified as calls with potential issues. When it comes to call reviews, the speech analytics tool enables your team to review customer calls in half the time, revolutionising your call review outcomes.

2. Arm your teams with tech-driven training

Lean on smart tech to quickly upskill your staff. Think beyond project management and task coordination tools and use innovative technology to help your teams serve your customers better – with the added benefit of developing their own skills in the process.

Differentiate your business from the rest of the industry by introducing a tool like Recordsure AI Voice, which can transcribe and segment all your customer conversations and risk score them. This smart tech will allow you to zero in on common competency issues through better feedback loops, identify training requirements and respond quickly – enabling your team to provide the best possible customer outcomes, every single time.

Garry Evans is Group Chief Product Officer at Recordsure and TCC Group.

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Addressing the cost-of-living crisis: How can firms help vulnerable customers?

For the past few years, the regulator has been tirelessly working to make protecting vulnerable customers a major priority of the financial services agenda. And given the context, that’s no surprise.

Since 2020, the country has endured the COVID-19 pandemic – which rendered millions unable to go to work – and is now grappling with a meteoric rise in the cost of household energy, petrol and daily essentials.

Indeed, for many across the UK, the new decade has seemingly presented one financial challenge after another. And with inflation heading towards 10% this year – whilst workers’ purchasing power has fallen compared to last year as pay rises fail to keep up – it’s unlikely that the crisis will be resolved anytime soon.

As a result, businesses will need to be well prepared for the influx of consumers approaching them for help with their finances.

But not only that: now more than ever, it’s crucial firms go the extra mile to check up on their customers’ situation – and ensure that those facing hardship are treated with respect, patience and compassion.

How should firms respond?

In times of crisis, it goes without saying that truly knowing your customer is paramount to safeguarding them from any course of action that could further hamper their financial health.

Advisers should remain cognisant of the ‘relationships of trust’ guidance surrounding Principle 9 of the FCA Handbook – and be extra diligent to uncover any emerging risk factors during the discovery process. After all, previous vulnerability calculations can quickly be rendered obsolete when the economic situation is worsening for many by the day.

When it comes to complex decisions, it’s vital you do all you can to empower customers to make their own well-informed choices by clearly explaining the pros and cons of all options open to them. Ensuring that your advisers are well-versed in compliance and conduct – and apply the best practice to their day-to-day interactions with customers – neatly ties into the directives laid out in the incoming Consumer Duty, which puts clear communication and providing choice at the heart of client interactions.

And you should make sure that vulnerable customers are getting the care and support they need by verifying individual clients’ risk factors and vulnerabilities are properly communicated between departments.

If you haven’t already, it may also be worth looking into how speech and document analytics technologies can help you ensure process adherence, and recognise emerging risks – as well as provide a robust audit trail to evidence that you’re complying with your responsibilities to vulnerable consumers.

 

Recordsure speech and documents analytics RegTech provide regulated industries with market-leading AI-driven tools specifically designed to enable organisations to deliver compliance, conduct and fair customer treatment.

Recordsure Business People

How should firms be preparing for the consumer debt crisis?

Consumers across the UK are currently facing the worst cost-of-living since the 1970s – with petrol prices rocketing to record figures in March and no end in sight to the ballooning cost of energy we’ve experienced so far this year.

Inflation is expected to reach 7% in 2022 according to the latest Bank of England inflation report. With wage inflation failing to keep pace and an uptick in redundancies following the end of the Covid furlough scheme, many face severe financial difficulties. Indeed, many are already taking on unsecured debt in order to pay household bills according to Bank of England figures.

It’s predicted that millions of people will struggle to repay mortgages, loans, credit cards and debts, instead prioritising bills such as Council Tax, or in the worst cases, simply ensuring they can put food on the table.

Credit institutions including banks, building societies, credit card companies and utilities would be wise to start preparing now. We’re anticipating a surge in the average percentage of customers in arrears, from the typical 3-4%, to around 12-15%.

What help is available for consumers?

There are schemes in place to help consumers manage their financial difficulties, like Breathing Space introduced in May 2021. This entails a 60-day freeze of interest, fees, and charges on debts, protecting customers against any enforcement action.

Despite this 60-day rebate, Collections and Recovery teams will undoubtedly be under pressure to work with consumers to help reprioritise their finances and work out a way forward that best suits their individual circumstances.

Frontline staff will need to have experience of sensitively handling individuals in financial difficulty and knowing how to help them navigate schemes such as Breathing Space, balanced with strong negotiation skills to work out a repayment plan that, ultimately, works for all parties.

Lack of experienced personnel

It’s fair to say that there hasn’t been this level of financial strain on consumers since the recovery from the 2008 financial crisis. As a result, there’s been limited investment in tools and training in this area. Many Collections and Recovery teams simply haven’t dealt with consumer debt on this scale before.

The staff with experience of the 2008 financial crash have by and large moved on from customer facing roles, leaving less-experienced agents to handle difficult conversations with customers in significant financial distress. At the same time, the Great Resignation has hit almost every industry, further impacting on a shortage of well-trained staff handling customer calls and cases.

Many organisations will be facing a staggering increase in calls from customers in financial difficulty or classed as vulnerable, while already struggling with understaffed teams operating at maximum capacity.

Leverage next-generation technologies

My advice would be to get ahead of this perfect storm by looking at how you’re going to optimise the capacity of your Collections and Recovery teams. And often, the key to this challenge lies in harnessing the power of automation so you can reserve your finite human resource for where it’s truly needed. 

RegTech products such as Recordsure AI Voice, for example, offer intelligent speech analytics solutions that allow for superior transcription of 100% of client conversations with in-built topic classification and risk-scoring capability – enabling you to optimise your operations, provide added supervisory oversight and ensure fair customer treatment.

Mark Hover, New Business Director, Recordsure
Mark Hover_Recordsure_Headshot

RegTech products such as Recordsure AI Voice, for example, offer intelligent speech analytics solutions that allow for superior transcription of 100% of client conversations with in-built topic classification and risk-scoring capability – enabling you to optimise your operations, provide added supervisory oversight and ensure fair customer treatment. What’s more, this AI tool enables your staff to be more efficient and brings focus to potential risk cases, so your teams can complete the quality review process in half the time.

Increased consumer demand will inevitably mean increased regulatory scrutiny. That’s why forward-thinking businesses are already starting to invest in cutting-edge assurance technologies – driven by smart AI and machine learning – to level up their compliance monitoring and evidencing capability.

Start the process of augmenting your team with the power to quickly and accurately handle and review customer calls now. That way, when call volumes inevitably start to rise, you’ll be able to provide every customer with a transparent, personalised service – that leaves no stone unturned – without sacrificing efficiency.

Mark Hover is Group New Business Director at Recordsure and TCC Group.

Financial graph on monitor screen_Recordsure Insights

How digital transformation can streamline your compliance process

United by the principle of ensuring firms do their part to provide a fair and transparent service for clients, regulators around the world have signalled their intent to continue strengthening consumer protections and raising standards further over the next few years.

And between the incoming Consumer Duty, the expansion of the Appointed Representatives regime and the planned harm reduction measures laid out in the FCA’s Consumer Investments Strategy, FCA-regulated firms in particular have a lot of new rules and guidance coming their way.

In fact, one in three businesses polled during the recent Wealth and Asset Management 4.0 research project felt that risk management regulations are likely to increase within the next two years.

So how can firms make sure they’re equipped to deal with these extra responsibilities?

As a FinTech innovator with decades of experience in driving transformation within financial services, Group Chief Commercial Officer Mark Hover knows – perhaps more than anyone – the radical impact that RegTech can have on the efficiency, accuracy and overall standard of your compliance activities.

Here, he explains why there’s never been a better time for firms to make the leap.

New challenges require new solutions

With so many new regulatory changes on the horizon, staying on top of compliance manually can quickly become unmanageable for even the most experienced teams. That’s why more and more businesses are turning to intelligent solutions and advanced technologies to help staff handle the day-to-day realities of maintaining standards.

The latest figures show private banks, retail asset managers and broker-dealer firms are leading the charge for this technological revolution. More than half of these organisations have self-reported to be in the mid-implementation or advanced stages of digital development.

In particular, around 65% say they’re now investing in process automation systems. Meanwhile 52% are pouring resource into smart data and analytics, and 46% are actively exploring tech-powered compliance platforms.

RegTech isn’t just a fad – it’s quickly becoming a must-have in the fast-moving world of financial services. 

Optimise your processes from end to end

Firms that have already made the switch have experienced first-hand the revolutionary impact digital transformation can have on both compliance and productivity.

Maybe you’re looking to automating file reviews, which we all know can be admin-heavy and time-consuming. Or, maybe you need a workflow tool to help your teams manage the never-ending to-do list for SMCR, and reduce the risk of accidentally missing a crucial deadline. Perhaps you want to tap into valuable MI so you can manage your processes more effectively and aid supervisory oversight.

Whatever you’re looking for, there’s a whole inventory of smart solutions now raising the bar for what’s possible without increasing the burden on your team.

How can RegTech transform your business?

1. Simplify compliance and assure quality

Compliance has come a long way since the days of filing cabinets full of case files. But even with the added convenience of digitisation, creating and maintaining a complete and organised set of client records can all-too-often turn into an uphill battle without the right tools.

Records filling aside, ensuring compliance and quality of advice is not a simple one-off task. When engaging in customer conversations, you need to take proactive steps to make sure that customers are treated fairly at all times – with advisors adhering to quality assurance processes and best practice.

 

By leveraging AI and machine learning technologies, our Recordsure AI Voice speech analytics transcribes and segments 100% of your client conversations – bringingeffortless clarity and consistency to regulatory evidencing, and compliance monitoring and review like never before. And that’s not all: AI technology focuses reviewers’ attention on high risk customer interactions – making your quality reviews quicker and more efficient, and offers actionable insights to help mitigate risks.

 

With all your client-facing interaction records at your fingertips, it’s easier than ever to ensure that all instances of customer advice are of the same high standard and drive better customer outcomes. And not only that, the comprehensive record of past conversations is an invaluable tool for advisers and their supervisors – allowing them to self-critique their performance, whilst enabling firms to upskill teams and improve future customer interactions. 

 

2. Open up a more efficient way of working

There’s no two ways about it – file checking has always been a meticulous and labour-intensive process. But it doesn’t have to be this way. Thanks to game-changing solutions, it’s now possible to reduce the resource-hours required for reviewing even the most complex files – without sacrificing accuracy.

Our Recordsure AI Docs solution, for example, automates some of the most time-consuming file checking tasks. It frees up valuable time for your assurance teams to focus on areas that their expertise is needed most. By increasing the number of checks carried out without scaling up human resource, AI Docs provides unparalleled transparency, precision and efficiency throughout the project lifecycle. 

This ground-breaking technology also forms the basis for TCC’s High-Performance Assurance platform, offering comprehensive MI to enhance your audit trail and keep the regulator satisfied without spending hours collating evidence as you work.

Not only does this streamlined workflow allow projects to be completed at remarkable speed, but your budget will stretch further too. 

3. Codify best practice within workflows

The best RegTech systems are developed in close collaboration with those who know the FCA’s expectations inside out – and are therefore designed to make best practice second nature to the teams using them.

Take SMCR for example. We know many HR teams manage the day-to-day administration of certain processes, like Fitness & Propriety assessments. Yet they simply don’t have the regulatory knowledge to know what to do with an irregular case, for instance.

Many platforms now provide case management workflows that guide users through each step of the process in sequence. By outlining exactly what’s required, and a process which can’t be deviated from, HR can get the job done at speed – while Compliance can be sure that important regulatory requirements haven’t been overlooked.

Given that research suggests 30% of firms think more rules around conduct and individual accountability are imminent, businesses rely on a robust process to manage this effectively. TCC’s SMCR Pro, for example, helps firms to embed compliance into the way the business operates and drive a healthy culture knowing their staff are fit and proper. 

Sabrina Del Prete Embedding Compliance with RegTech

Five-Minute Insights: Embedding compliance with RegTech

Technology and RegTech help bridge communication gaps between departments, embed compliance and unlock new efficiencies.

Sabrina Del Prete is a leading digital strategist and business transformation expert specialising in FinTech integration and development within financial services. Sabrina founded financial product governance and data analytics business Kore Labs in 2017 and serves as the firm’s CEO. She also remains actively involved in the wider entrepreneurial community in the role of a strategic advisor. She sits on the London Institute of Banking and Finance’s Board of Governors and is a Founding Member of the Centre for Digital Banking and Finance.

As one of the financial services industry’s pre-eminent champions of RegTech and its ability to revolutionise connectivity and compliance, we appreciate Sabrina offering her expertise on our recent webinar examining the findings of the Wealth and Asset Management 4.0 study.

During the discussion, Sabrina gave indispensable advice on how technology can help bridge communication gaps between departments and unlock new efficiencies.

Watch now

Compliance, business efficiencies and technology, here is how it works

1. The client journey begins earlier than you think

Received wisdom would have us believe that the client’s journey begins when they first interact with your firm’s website, app or another external contact point. And so, it’s understandable that firms regularly pour significant resources into creating the most attractive and convenient client-facing platforms possible.

In reality, the client’s experience is heavily influenced by what comes before then, what’s happening within the firm to root out inefficiencies and roadblocks that may manifest later down the line.

For this reason, Sabrina suggests:

Many firms would be better served focusing their digital transformation inwards to ensure they’re able to adapt to both regulatory requirements and clients’ evolving needs.

Sabrina Del Prete

Focused externally only, you run the risk of endlessly tweaking your website menus whilst deeper internal problems continue unabated – which at best breeds inefficiency and, at worst, could lead to unsuitable advice or products being recommended.

2. Compliance should be embedded within your process

In an era where more and more back-office tasks are automated, firms should be seizing the opportunity to embed best practice within their day-to-day activities. Sabrina notes:

Compliance should be hard-wired into the very way processes are carried out, as opposed to being achieved via a box-ticking exercise at the finishing line.

Sabrina Del Prete

In other words, businesses need to make sure compliance is embedded directly into the way they work. And by leveraging digital tools to help along the way, the best practice can be hard-wired into system – and altered as and when policies change – to drive positive cultural change.

The moving target of regulatory expectations once left compliance teams perilously vulnerable to human error. RegTech now offers firms the tools and guidance to meet their obligations at speed. And not only that, as rules come and go, RegTech platforms can be easily updated to ensure your compliance framework is always fit for the future.

3. RegTech can bring the industry together

Whilst many regional variations remain, it’s fair to say that regulators worldwide are moving in a similar direction of travel. And that’s little surprise given they largely operate under the same guiding principles.

Despite this, firms still all too often react to new legislation in an insular manner – be it hiring consultants to look at their unique situation, or otherwise taking an ‘every man for himself’ approach to achieving their compliance.

The truth is we’re not all that different. That’s why, for Sabrina, the most effective path to success could lie in a shared platform where firms can work collaboratively through these early adjustment phases:

Clients say to me, “don’t ask me ‘how’s my process?’, show me what the others are doing!” – because there may be some best practice there.

Sabrina Del Prete

There is more to consider, Sabrina continues:

If we have a digital solution that’s used by multiple organisations, that takes the digital process from inside the bank to outside – where people can contribute – effectively, you’re collecting the wisdom of the crowd.

Sabrina Del Prete

To hear Sabrina’s take on how RegTech can ‘join the dots’ towards more efficient compliance processes, watch our full Five-Minute Insights video now:

Watch Now - Five Minutes Insights With Sabrina Del Prete