In this blog post we take a look at how Open Banking and Open Finance are helping Banks and Building Societies benefit from the Consumer Duty.
Trust and customer focus
When the world’s first Building Society was formed in 1775, with the singular purpose of helping its members build a home, the UK’s Banks were already nearly a hundred years old and providing a range of security, lending and money transmission services. Nearly 250 years later in June 2022 the Bank of England granted a licence to the UK’s newest ‘Neo-Bank’, the 37th licence to be granted since the financial crisis in 2008. Whilst Banks, Neo-Banks and Building Societies each have very different origins their continued success will be built on two things: Trust, and a relentless focus on customers’ needs and objectives. And now, in addition to being good business, the FCA has effectively mandated these two things in the Consumer Duty.
Are Banks & Building Societies ready for Consumer Duty?
Moneyhub’s recent Whitepaper, ‘Consumer Duty: Business Burden or Golden Opportunity’ suggests not. Just 30% of Building Societies and 35% of Banks claimed they would be compliant by the deadline. Perhaps this is no surprise. The FCA has described the Consumer Duty ‘as a significant shift in what it expects of firms’.
How to respond?
Whether ‘Designing and distributing products that meet customers’ needs’, ‘Helping customers make informed decisions’ or ‘Supporting customers to pursue their financial objectives’ our survey revealed that the overwhelming majority of Banks and Building Societies agreed that a ‘Holistic view of their customers’ income, expenditure, assets and liabilities’, and ‘Behavioural insights based on customers’ transaction data’ were either important or very important.
Trust, understanding and insights
If trust is central to the Consumer Duty then trust between two parties is only ever possible with mutual understanding. However true understanding is impossible without context. To realise the opportunities within Consumer Duty firms must use data to understand the precise needs, characteristics and behaviours of the customers they serve and intervene and support them to avoid foreseeable harm. Banks and Building Societies must ask ‘what new sources of customer data do we need?’, rather than ‘what data do we already have?’ to be able to comply.
Data powered solutions - it’s all about the ‘ilities’
Moneyhub’s open data platform provides access to Aggregated, Categorised transaction data including current accounts, cards, savings, loans, mortgages, pensions and investments to power processes and dashboards that identify vulnerability & capability, affordability, suitability or eligibility.
The same data can help firms understand their customers’ needs, characteristics and behaviours including how and why customers use (or fail to use) financial services. When combined with our Personal Financial Manager, it can identify real time changes in consumers’ circumstances, such as a change in employment, increasing exposure to debt or inability to bear loss at both a market and 121 level.
Combine that with the ability to nudge consumers at the right time and in context and one can see why Open Banking and Open Finance data should be central to firms’ compliance with Consumer Duty.
From product outcomes to customer outcomes
Many Banks and Building Societies claim to have millions of customers when in reality they’ve just sold a lot of products. In a complex, competitive, confusing world Moneyhub helps turn transactional buyers into loyal, engaged customers. When clarity and confidence about what your customers really need and want is in short supply, Moneyhub gives you the tools you need to comply with the Consumer Duty AND deepen relationships with customers, increase share of wallet and grow your business.