Consumer Duty, introduced by the Financial Conduct Authority (FCA) in the UK in 2022, officially came into force in July 2023. It is a significant regulatory framework that sets higher and more precise consumer protection standards across the financial services industry. Its primary objective is to ensure that consumers receive the support they need, clear and understandable communications, and access to products and services that meet their needs and offer fair value.

This initiative is critical in building trust and confidence in the financial services sector, which has seen declining consumer confidence and increasing complaints about service quality.

The FCA anticipates that the Consumer Duty will enhance results for consumers across all business interactions between companies and their customers. The Duty’s four outcomes address the fundamental aspects of the firm-consumer relationship. The four key outcomes include:

• Product and service design: Products and services should meet the needs of the target consumer group, considering suitability and intended benefits for different customer segments.
• Price and value: Pricing models must represent fair value, assessing whether the benefits justify the cost to the consumer.
• Consumer understanding: Financial services must ensure that customers understand the products and services they are using, providing clear, transparent, and accessible information for informed decision-making.
• Customer support: Adequate support must be provided throughout the customer journey, including effective after-sales service and timely issue resolution.

Service design is particularly well-suited to effectively planning and implementing Consumer Duty due to its customer-centricity and holistic lens.

Holistic service design involves comprehensive planning and execution of a product or service, from initial concept to final delivery and beyond, considering every touchpoint and interaction an employee and/or customer has with it, front or back of house.

This approach ensures that all aspects of the service are mapped out for visibility and seamlessly integrated to focus on delivering value. Key elements include:

Customer centricity is the core of Consumer Duty and Service Design, crucial for rebuilding customer trust and confidence. Leveraging these principles allows financial services to turn regulatory requirements into opportunities for creating better customer experience.

Consumer Duty necessitates operational changes, offering a chance to redesign services with a customer-first approach. Investments in training, system upgrades, and seamless service processes ensure staff can deliver exceptional experiences while complying with new regulations.

Enhanced data capabilities are vital for monitoring customer outcomes and identifying improvement areas. Financial services should safely and securely utilise customer data to continuously refine services and establish accountability frameworks to uphold customer-centric values.

Consumer Duty compels financial services to design products and services that meet consumer needs and ensure accessibility for all consumers, including those who rely heavily on cash and face-to-face services. The Financial Lives 2022 Survey report noted that 6% of adults in the UK still rely on cash and in-person services. Financial services must take an inclusive design approach to meet these consumers’ needs in the shift towards digital banking.

While the survey found that 88% of UK adults use online or mobile banking, Consumer Duty ensures that digital services are user-friendly and accessible. This includes providing clear information and support for digital channels, reducing the digital divide, and ensuring all consumers benefit from technological advancements in financial services.

Financial services organisations can transform compliance challenges into opportunities for enhanced customer experience, fostering trust and loyalty by focusing on these enhancements.

For example, Zühlke helped HSBC UK successfully adapt its personal investment service to the UK market. By harnessing the power of customer research, the team identified a significant mismatch between the service’s initial configuration for the Asian market and the distinct needs of UK consumers. This insight led to a concerted effort to design the app service to better educate and guide customers to build their confidence and investment skills.

As a result of the customer-centric approach, HSBC UK has seen year-on-year growth, with new investment business volumes increasing by 93%. Plus, the mobile journey has now become the preferred channel, with over 64% of customers opting to invest with HSBC UK through it.

Consumer Duty is not a one-time compliance exercise but a continuous commitment to improving customer outcomes. Financial services organisations are required to collect and act on customer feedback regularly. This feedback loop helps financial services promptly identify and resolve issues, consistently meeting their customers’ evolving needs.

The regulation has a market-wide impact, with a significant percentage of financial services organisations adjusting their practices in response to Consumer Duty. This industry-wide shift towards higher consumer protection and service quality standards is expected to enhance the financial services sector's overall reputation, leading to increased consumer trust and confidence.

By focusing on these principles, financial services organisations can create products and services that support customers' immediate needs and contribute to their overall economic and societal wellbeing in the long run.