New research from Moneyhub has revealed that only 22% of firms believe that they are currently compliant with the upcoming Consumer Duty regulation.
The Open Finance data and payments platform said this is despite 79% of Financial Conduct Authority (FCA) regulated firms acknowledging the significant impact that the new Consumer Duty regulations will have on their way of doing business.
56% of decision makers at these firms fear that their business is not prepared nor do they currently have projects in place to become compliant ahead of the deadline. This is a significant concern given the FCA expects boards to have an implementation plan approved by the end of October 2022.
The FCA’s new regulations are to ensure that customers receive communications from financial services firms that they understand, and are being offered products that meet the individual’s need at the point of sale and throughout the entire product lifecycle, offering fair value and providing support when they need it.
Importantly for FCA regulated companies, these regulations will eventually affect firms’ book of business rather than just new business. This in itself will prompt a re-evaluation of products that current customers are on and whether they are still appropriate, Moneyhub said.
While the FCA has shifted the first implementation deadline for firms back from April 2023 to July 2023, with the majority of businesses still lacking plans to make the business compliant, there is a risk that many will not meet the new deadline. Moneyhub argues that, with legacy systems in use by many businesses this exercise will be difficult, as knowledge of the customer and their current and ongoing situation will be paramount when implementing change.
Open Finance is a solution that can bridge the disclosure gap, help firms become compliant at speed, and significantly reduce the cost of compliance, the firm says.
Samantha Seaton, CEO of Moneyhub, said: “While many firms believe they are already customer-centric, Consumer Duty will test the reality of this. The new regulation demands a level of customer knowledge that most firms are yet to appreciate. The amount of data needed on the customer to comply with Consumer Duty requires a new level of operation for most businesses.
“There is an expectation that boards already have a plan in place by October. However, we can see that this is unlikely to be the case.
“By not preparing early for the incoming regulation, firms not only risk being non-compliant, but also missing out on the opportunity that Consumer Duty presents. Taking a customer-centric approach rather than a product-led mode of operation is now imperative for all businesses. Moneyhub’s platform can provide this knowledge and the ongoing monitoring to ensure appropriate and suitable products now as well as throughout the entire lifecycle of that product.”