New regulations in the financial services industry designed to protect customers are putting additional burdens on companies regarding how they collect, store and utilise data. The UK’s Financial Conduct Authority (FCA) has recently announced plans to implement enhancements to its Treating Customers Fairly (TCF) regulation and introduce its new Consumer Duty package of regulation. Both put the burden of compliance on financial services companies and encompass guidelines for utilising technologies effectively – and safely for consumers.
Although first introduced in 2006, the TCF principles require FCA-regulated firms to work towards six outcomes that focus on fair treatment of customers, encompassing how they are sold to, advised, informed, and served. However, a refresh is needed as the world has changed since the pandemic and increased reliance on technologies such as AI to serve customers.
At the same time, the FCA is introducing a new set of Consumer Duty regulations set to come into force in July 2023. Consumer Duty means regulated firms are expected to embody a culture of placing consumers first when conducting retail-facing business. As a result, firms will need to ensure they enable customers to make informed decisions and achieve their desired outcomes. This will require firms to collect data and track customers’ interactions with their business to prove they are focused on delivering good outcomes.
As part of this, firms’ data strategies must be upgraded to ensure they can identify, monitor, evidence and verify the outcomes their customers experience. Part of the challenge of complying with the higher standards the Duty sets out is cultural, but there are also substantial technical challenges to address, and firms need to take steps to prepare.
These regulations and additional rules in the pipeline are aimed at protecting consumers. Still, there is a benefit for firms that can use the processes they implement to ensure compliance to reduce the risks they face around AI, machine learning and their implementations of cloud-based technologies. These technologies are not necessarily negatives that present compliance burdens. They can also be harnessed to make it simpler to achieve compliance. For example, intelligent data storage can result in an easy search for information that can improve compliance. Similarly, automation can make various steps of the Consumer Duty chain simpler to report on and to recover when required.
Organisations must prepare carefully to ensure compliance and recognise that this is an evolving situation, with additional regulations continuously coming into play alongside the introduction of updates to cloud, communication, automation, and AI technologies. These can both disrupt and aid compliance teams. A careful balance must be found to ensure technology is working for your team rather than your team struggling to find ways to utilise technologies compliantly.
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