Why a ‘machine line of defence’ is needed for the FCAs Consumer Duty

Why a 'machine line of defence' is needed for the FCAs Consumer Duty

With the UK’s FCA having released its final guidance on Consumer Duty proposals, firms have been given new requirements they must meet.  

Aveni, a RegTech platform powered by cutting-edge speech analytics, has released a new report exploring ‘Why a machine Line of Defence is critical to meeting the FCA’s Consumer Duty.’

The Consumer Duty enforces controls that ensure firms provide good outcomes for customers. This includes giving customers communications they understand, products and services that meet their needs and offer fair value, and support when needed.

Other changes include making it easier to switch or cancel products and remove rip-off charges. Firms have 12 months to implement the new rules for both existing and new products.

The regulator also recently issued a letter to over 3,500 lenders to encourage them to help their vulnerable customers and those who could struggle in the coming months. It states that firms should understand each customer’s individual circumstance and offer additional support where needed. Any firm that fails this will be expected to improve customer treatment.

Aveni’s report states that the FCA is moving to a ‘show me, don’t tell me’ approach, with a data-first evidentiary control model, rather than a person-centric oversight. As a result, Aveni has warned firms will need to provide actual data to the FCA on what they are doing to protect customers. This will put an increased pressure on the quality of data provided, with more regular MI and metrics being used.

It said, “To meet the consumer duty of care guidelines, firms will need to identify and implement the right technologies to monitor and analyse a range of different data points. This will include every customer interaction and outcome, with a higher number of risk points that will be regularly far more stringently than previously. Agent performance will also be a key factor to monitor, ensuring that customers receive consistently good customer service from their providers.”

How to prepare for the change

It stated that AI platforms, like Aveni Detect, are ‘game changers’ when protecting customers and having the data and MI to prove your compliance with the FCA’s consumer duty of care.

In its new report, Aveni claims the changes made through the Consumer Duty claims firms that rely on the traditional three lines of defence model will not be covered.

It stated that firms currently complete a host of governance, including the segregation of duties, marketing communication committees, training programmes, client committees and product governance. However, it claims just 35% of consumers trust their financial services providers to act in their interests.

Furthermore, with traditional frameworks, processes and data systems, firms will need a sizable QA team to monitor conversations and handle Consumer Duty procedures. The only way to efficiently monitor discussions is through technology that can capture, analyse, understand and action data from interactions.

How Aveni offers a ‘machine line of defence’

Aveni recently released the Detect platform to help meet the Consumer Duty changes. The platform leverages natural language processing to monitor every customer interaction and produces data-led evidence of compliance.

The Aveni Detect platform boasts a ‘machine line of defence,’ which captures every customer interaction and analyses it to provide vital feedback to three other lines of defence to ensure regulatory compliance.

Within the first line of defence, the platform captures and analyses all customer feedback, flags and assesses any expressions of dissatisfaction or vulnerability, and provides feedback on products and services.

As for the second line of defence, Detect provides machine assessment for every single customer interaction, regardless of size. It automatically triages high-priority cases that require human interaction and can identify themes and trends to fuel actionable insights within the business.

For the third line of defence, the Detect platform offers greater transparency and improved understanding of customer interactions. It has data-driven thematic reviews with clear breakdowns of topics, themes and insights.

Read the full post here.

The RegTech company has done a lot of work with the Consumer Duty and recently revealed the five areas firms will need to improve to be compliant.

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