How to demonstrate Consumer Duty compliance with technology


The introduction of Consumer Duty into law is fast approaching, with 31 July being the date it officially comes into force. How can businesses demonstrate its compliance through technology?

In its latest Consumer Duty webinar series, RegTech firm Aveni and its CEO Joseph Twigg sat down with key market players to discuss the latest tech solutions in product and service governance, automated monitoring of Consumer Duty KPIs and other innovations.  

The FCA’s Consumer Duty is aimed at improving consumer protection and ensuring good customer outcomes. In the opinion of Aveni, complying with this requirement involves not just implementing new strategies but proving that they’re effective with evidence that is data-backed.

Some of the key pillars of the Duty that firms will need to build their programs around are product suitability, price and value, customer understanding and customer support.

Aveni said, “Compliance is an ongoing process of ‘test, learn, and act,’ focused on understanding target markets, assessing product value across customer types, and monitoring the entire product life cycle. The FCA emphasises that the regulation is not a one-off activity but requires continuous monitoring, data gathering, learning from the data, and using insights to improve products and services.”

The company highlighted that product manufacturers and distributors are required to share information about their products and value with each other by April 30. Over the next few months, Aveni stresses, companies will get a better understanding of what constitutes bad practices, what is appropriate and what others in the industry are doing.

How can companies use technology to manage and future-proof regulatory compliance? In this area, it was highlighted in the webinar that effectively managing and future-proofing regulatory compliance can be challenging due to the non-prescriptive approach of the FCA’s regulatory framework.

It was continued, “To navigate these rules, companies need two components: a technology platform to store the rules and an expert to interpret and provide specific guidance on how to apply them. Currently, compliance is typically managed on a spreadsheet, with columns detailing the rule, its impact on products and services, and necessary controls and implementation steps.”

Moving such requirements and interpretations into a digital platform would, in the opinion of Aveni, enhance compliance efficiency. This is due to compliance status’ on a digital platform being determined by querying the dataset with questions such as ‘Are the features and terms of the product transparent and easy to understand for customers’, with the platform then able to provide a result indiciating whether or not  the product meets the required standards. Additionally, a centralised database can be updated in real-time as rules change, and it can be integrated with various back end systems.

Aveni explained, “Implementing significant regulations like the Consumer Duty and updating internal policies can be time-consuming. However, digitising the rules enables the creation of a digital unit that can be reused for future products and services. Companies can leverage the same interface to apply compliance standards efficiently across different activities.

Due to the often complex and time-consuming nature of some tech procurement processes, some firms resort to short-term tactics to meet the deadline – potentially compromising their long-term strategy.

“This rush to comply often results in a narrow focus on achieving short-term goals, without considering sustainability or embedding the solution into the business. This approach can lead to missed opportunities, inefficiencies, and a lack of efficiency and robustness in business processes,” the firm outlined.

Heading towards July, the FCA has already outlined a follow-up phase after the July implementation date to evaluate how Consumer Duty requirements are embedded into business processes.

This includes evaluating management information, dashboards, and the ‘test, learn and act’ process. “To achieve consistency, coherence, and traceability in these processes, firms need access to advanced technology solutions. Without the right technology, companies risk falling behind and failing to meet the long-term goals of Consumer Duty compliance.”

Aveni explained that the FCA will show leniency towards companies that take a proactive approach and demonstrate a ‘direction of travel’ in their efforts to review and implement technology and processes that comply with the Duty.

The company added, “The FCA’s Consumer Duty is an outcomes-based approach, with the regulator requiring firms to demonstrate how they’re complying with regulations rather than prescribing specific methods. The regulation focuses on outcomes for customers and business conduct, which shapes the regulatory framework.”

The FCA, in order to demonstrate compliance, expects companies to show improvements in outcomes compared to previous practices, such as fewer customer complaints, selling only to appropriate customers and better overall outcomes for customers.

“Firms have to manage and analyse vast amounts of data, including product-specific, client-specific, transaction data, how and why it changes over time etc, to achieve this. They must implement data-driven systems that consolidate and analyse the datasets to effectively utilise this data for compliance,” Aveni continued.

It was highlighted in the webinar that the Consumer Duty is a ‘catalyst for companies to adopt data-driven compliance and assurance systems and require investment in technology’.

Aveni said, “Regulatory solutions that leverage technology to facilitate compliance, can play a critical role in achieving the Consumer Duty outcomes. RegTech aims to reduce the burden on individuals in a company by embedding compliance into their core functions and providing guardrails that adapt to their activities.”

This can be achieved by encoding rules into systems and monitoring data in real-time, the RegTech firm claimed, allowing for the machine assessment of customer interactions and marketing communications. Potential issues will be flagged for review by higher skilled human teams. The ‘Human+’ technology combination is critical for achieving the breadth and depth of assurance required for consumer duty compliance.

The company added, “Failing to adopt technology solutions can result in reduced assurance, as assessments become more time-consuming and complex, and data volumes increase. Firms should consider implementing a framework of data-driven technology solutions that collaborate to bring automation and specialists into a coherent model. Companies that recognise the opportunities for automation, efficiency, and new insights can derive significant competitive advantages beyond compliance.”

Aveni concluded, “In conclusion, technology-driven solutions will be essential for firms to demonstrate compliance with Consumer Duty regulations set forth by the FCA. Given the sheer volume and unstructured nature of some of the most valuable data for these organisations, robust product and service governance platforms will be necessary.

“Monitoring and analysis capabilities will also be required to demonstrate the effectiveness of the processes and actions taken by the organisation to meet regulatory requirements. It goes without saying that leveraging technology is the most efficient strategy for ensuring compliance with the regulations.”

The full webinar can be watched here.

Aveni recently partnered with Delta Capita, a global capital markets consulting, managed services and tech provider, to help the latter boost its Consumer Duty offering.

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