On 27thJuly the FCA published its much anticipated Policy Statement and Finalised Guidance. This sets new standards across the financial services, including banking, insurance and credit firms, which puts the customer’s needs first.
This is the most significant regulation since the FCA’s Retail Distribution Review in 2012 and will provide a major cultural shift for the sector. The regulation is to come into effect on the 31st of July 2023 for most financial services, so there is an urgent need to understand what the standards mean and how it should reshape engagement with the customers.
There are four core areas outlined in the FCA’s statement:
- Product and services to meet the need of the users
- Price and value to be fair
- Consumers understanding to be enhanced by clear and digestible communication
- Consumer support to be provided throughout the engagement with the service
Behavioural science can provide a clear, innovative and effective approach to answering these challenges.
1. Product and Services
Firstly, the financial services will have to understand their customers and their needs. This does not only mean understanding the main pain-points of the average customer but also investing in accessibility to map the needs of minority users who may face unique challenges in using the platform, such as the elderly or those with additional needs.
The Finalised Guidance states that, “The Duty raises the standard of care afforded to all consumers, while our guidance on the fair treatment of vulnerable customers (FG 21/1) sets out what firms should do to ensure that customers in vulnerable circumstances experience outcomes as good as those for other consumers.” This helps in making financial services more accessible, which also benefits businesses, who will now be able to reach and connect with a wider pool of consumers.
But first, to truly understand the specific needs of your audience, you need to carry out research into their behaviour. Usability testing and ethnographic research allow you to observe how people behave, without relying on people telling you how they think they behave, which provides a richer, truer form of research. Studying how real people use your services, what they struggle with and the challenges they face, reveals the pain-points everyday consumers are facing, which you can then look at to address ahead of the FCA’s update.
2. Price and Value
Financial institutions need to ensure that they clearly communicate what customers can expect from paying for their services. Firms need to ensure not to ‘exploit consumer lack of knowledge and/or behavioural biases to enable unfair prices to be charged’ – the Finalised Guidance states. This refers to the use of widespread ‘Dark Patterns’, such as hidden costs, misdirection, sneak into basket or price comparison prevention practices that trick users into paying more than they intend or paying for services they do not need.
A behavioural audit on the customer journey can identify where customers get frustrated. This can highlight any areas of ‘bad practice’ that are currently being used. You can then remove them and replace them with services that put the consumer first, making the user experience more positive overall which will only be beneficial for your business in the long run.
3. Consumers Understanding
Financial institutions need to redesign their communication with their customers. Financial services often use jargon and technical language that is, at best, difficult to comprehend to the average customer. The new regulation serves as vehicle to a paradigm shift in this area. Communication will need to be concise, short and to the point. Therefore, businesses are going to have to review how easy their website is to understand.
Eye Tracking and Biometric research can provide feedback on exactly how your customers view your website and communications and what needs to change. Layering these insights with research into your customer segments can then allow you to tailor your copy to different personality types to have a greater impact. This can increase engagement seeing as the copy resonates with the audience and is written in a way they understand.
4. Consumer support
Lastly, any service needs to provide support to truly meet the needs of its customers. If you don’t support your customers, they can leave your business or even become active detractors by leaving bad reviews which deters potential new customers. Therefore, putting customer support at the heart of your business is imperative for customer retention and satisfaction.
Qualitative research will be required to understand the barriers and pain-points of various customer groups to identify the time and kind of support that would most benefit them.
Why should financial institutions care about FCA Customer Duty PS22/9?
Simply put, from 31st July 2023, it will be against the law to violate the above principles. The FCA’s enforcement powers for those who cross the line include a range of measures from issuing fines to withdrawing a firm’s authorisation. However, more importantly, it should be in all financial services’ best interest to meet these criteria as it will translate to better experience to their customers and more business down the line.
However, these business changes don’t happen overnight. It takes time to research and understand your audience; therefore it’s best to start sooner than later. Behave offers comprehensive solutions that equip financial services with the means to not only meet the criteria, but to excel, and lead the way in championing this new customer first approach.
Want to know how Behave can help your business? Get in touch with our experts today.