Firms cannot neglect further Consumer Duty changes two years on
Two years on from Consumer Duty, firms must recognise their response will never be “done”, according to Michael Shand. The managing principal at financial services consultancy Capco shares his thoughts ahead of the two-year anniversary of the landmark regulatory shift.
Described as the ‘biggest overhaul for the UK’s financial services industry in 20 years’, Consumer Duty is a standard introduced by the Financial Conduct Authority. Intended to improve consumer protection for financial-services firms in the UK, the changes officially came into force on 31 July 2023, and established a ‘Consumer Principle’; through which firms must "act to deliver good outcomes for retail customers". Affected firms therefore need to review their products, and their customer journeys – including effective anti-fraud controls.
Two years on, Capco Managing Principal Michael Shand believes that Consumer Duty has been a positive step for both the financial services industry and consumers. According to him, customer outcomes are now “firmly embedded in the regulatory and strategic agenda across financial services”, leading to “genuine progress”.
The Capco expert continues, “Many firms have taken meaningful steps to adjust charging structures to deliver better value, simplify products and communications to help customers navigate complexity, and proactively engage with customers to support better outcomes – for example, helping those stuck on low-interest savings accounts. The FCA’s emphasis on delivering good outcomes for vulnerable customers – especially in the context of the post-Covid cost of living crisis and the Duty’s introduction – is particularly notable and has genuinely raised standards of support for those who need it most.”
However, the journey is “far from complete”. Even as some firms have truly embraced the duty, and embedded it into their culture, others – who have approached it primarily as a compliance or regulatory exercise. As is often the case when firms adapt to regulation along these lines, they have “found themselves bogged down in governance-heavy tasks, such as traceability logs and extensive reporting processes”.
Shand adds, “Not only does this mean compliance quickly becomes a slog, disengaging employees, but those taking such a tick box approach also risk missing out on significant opportunity to generate meaningful product and service insights. Looking ahead, it’s essential that firms recognise that their response to the Duty will never be ‘done’. Continuous improvement is a core expectation and it’s essential that firms see embedding the Duty into day-to-day operations as a top priority.”
That means firms need to ensure three things for long-term adaptability. They should invest in data and insights to understand and evidence good outcomes; train all staff on how to design and deliver those outcomes; and ensure governance processes are effective and capable of identifying and evidencing opportunities for improvement.
Shand expands, “Firms should be actively exploring how they use technology, data (including consumer research), and their people to keep raising standards. There are plenty of opportunities to do this – and those that do it well will not only satisfy the regulator but also unlock real commercial benefits… Ultimately, all stakeholders – customers, employees, boards, and regulators – should be able to clearly see that the Consumer Duty sits at the heart of the firm’s strategy, services, and products.”
Now a Wipro company, Capco is a global management and technology consultancy specialising in driving digital transformation in the financial services industry. With a growing client portfolio comprising of over 100 global organisations, Capco supports digital initiatives for banking and payments, capital markets, wealth and asset management, insurance, and the energy sector.
