Waheed Mahmood, Financial Services Lead, Rackspace Technology
July 31st marked the first anniversary of the Financial Conduct Authority (FCA) Consumer Duty. Designed to improve how the financial sector serves customers, the Duty sets “higher and clearer standards of consumer protection” and requires that customers’ needs are put first.
The Consumer Duty was created to protect customers from making poor financial decisions and to ensure Financial Institutions (FI’s) act in good faith. It mandates that FI’s provide fair value by supplying customers with all the appropriate information. Heralded by the FCA’s chief executive as “one of the most far-reaching, cross-cutting pieces of regulation” in decades, the Duty was presented as a prime opportunity for firms to elevate their compliance standards and enhance customer relationships.
This regulatory shift empowered FI’s to review and refine their products and services, so each customer interaction is optimised. By doing so, FI’s would not only protect themselves against compliance infractions but also build customer engagement and trust.
One year later, the financial industry has seen varied progress in implementing the Consumer Duty principles. While some FI’s have made significant strides, others face huge fines and struggle to navigate the complexities of compliance, with poorly executed user journeys and confusing policy wordings still of concern to customers.
Consumers now expect their financial services to be as accessible and easy to use as other areas of their lives. Technology can help achieve this. Organisations that leverage technology can increase customer satisfaction by 15%, reduce the cost to serve by 20% and boost conversion rates and growth by 20%.
As we look ahead to the next year of implementation, here are some ways FI’s can leverage technology to ensure customers are at the heart of their processes.
Leveraging new technology
Successful digital transformation in financial services requires a thorough examination of an institution’s existing application and infrastructure to identify areas most in need of improvement, assess business risk and opportunities for upgrades. Many FI’s are still burdened by outdated legacy systems and infrastructure, which struggle to meet the demands of modern digital banking services. This puts customer data at risk of being compromised, often representing the weakest link in FI’s cybersecurity defences.
By prioritising tech advancements, FI’s can significantly enhance the overall customer experience, offering smoother digital interactions and transparency in the user journey while reducing transaction processing times and delivering personalised services tailored to specific customer needs.
Generative AI (GenAI) is a great tool that FI’s are starting to leverage to achieve this, with McKinsey expecting GenAI technology to add between $200-$340 billion to the global banking sector. AI chatbots, for example, can provide convenient, real-time customer support, handling routine inquiries and freeing up human agents for more complex issues.
Additionally, machine learning algorithms can analyse spending patterns to offer customised financial advice and recommendations and blockchain technology can be leveraged to create more transparent and efficient processes, particularly in cross-border finance. This not only streamlines operations but empowers customers with greater control and insight into their finances, ultimately fostering stronger relationships with FI’s.
However, before introducing GenAI, FI’s need to ensure they have the right infrastructure in place. GenAI models rely heavily on quality data for training and making predictions, and having the correct internal systems to support this is essential to unlock the potential and efficiency of GenAI fully. A cloud-enabled ecosystem and platform is especially well-suited for organisations with specific needs related to control, security and workload customisation. By implementing this architecture, FI’s can ensure their systems can cope with the large storage and encryption requirements of GenAI. As a result, this can enhance both performance capabilities and data security.
Enhancing customer’s experience with cloud
Consumer Duty regulations emphasise the importance of guiding individuals toward sound financial decisions. To achieve this, FI’s must leverage customer insights, however, legacy systems often hinder effective data sharing and analysis, limiting the ability to provide personalised guidance.
By leveraging cloud capabilities, banks can modernise their applications, enabling them to create and deliver enhanced experiences. This includes offering intuitive self-service portals, real-time transaction monitoring, personalised recommendations and faster responses or approvals. Leveraging the cloud can also help banks pinpoint moments of derailment, making it possible to identify friction points and usability issues, which has a direct impact an FI’s bottom line.
The seamless integration of cloud services with existing banking systems also enhances data flow and interoperability. Tools like Azure Stream Analytics enable banks to process and analyse data in real-time, providing deeper insights into customer behaviour and preferences. This empowers banks to develop and deliver personalised advice and services, enhancing customer satisfaction and engagement.
However, for this to be successful, FI’s must first ensure that these customer insights are disseminated across departments. Breaking down departmental silos can drive improvements in product development, marketing strategies, and customer service protocols. According to Ernst & Young, this approach should be established in a centralised framework that ensures a consistent experience across the banking sector while leveraging unity between global and local teams.
To facilitate this, it’s crucial to integrate design and data efforts. This will require a multi-disciplinary team from all business areas to formulate a coherent enterprise wide data strategy, data architecture that translates to a platform. This integration will help translate customer insights into actionable strategies.
If financial service providers want to keep up with – or better yet, outperform – the competition, they need to upgrade their customer experiences so that they are delighting and engaging their customers on a personal level. Implementing innovative AI technologies powered by cloud capabilities is essential for attracting new customers and fostering loyalty among existing ones. Today, there shouldn’t be an FI that doesn’t have CX as a priority.
To stay ahead, financial institutions must be compelling and relevant to the point of hyper-personalisation and not give consumers any excuse to leave a site or go elsewhere. By streamlining the payment system, identifying and removing spots of friction and breaking down silos, financial institutions can fine-tune their digital offerings, understanding what elements work with customers and why.