Open banking deemed crucial to new Consumer Duty
Open Banking Excellence (OBE) founder and chief executive Helen Child believes that open banking can help to tackle the extra regulatory steps required to meet the new Consumer Duty.
Yesterday marked the deadline for UK financial services firms – including peer-to-peer lending platforms – to have finalised implementation plans for how they will comply with the new policy.
The Duty requires firms to “focus on supporting and empowering their customers to make good financial decisions” and “avoid foreseeable harm”.
“The Consumer Duty puts customers in control – which is also one of the bedrocks of open banking,” Child said.
“The consumer’s voice will now be heard by the very people with the desire, resources and data to drive forward product innovation.”
Read more: Firms invest in tech to comply with new Consumer Duty
Use of consent-based data sharing can help to both demonstrate compliance with the Duty and elucidate customers’ needs and financial context, according to OBE.
At a recent panel convened by OBE, a group of open data pioneers discussed the new rules.
“Today, we have come to expect consumer protection against sharp practice”, said Samantha Seaton, chief executive of open finance platform Moneyhub.
“Financial services is a market where the buyer often knows far less than the seller, so Consumer Duty regulations will help to make sure that any regulated product provider knows their customer as well as they know their products and ensure they do their utmost to ensure that no foreseeable harm will come to customers.”
However, business development director at Moneyhub Vaughan Jenkins warned that there is “a difference between awareness and readiness”.
Read more: FCA chief says competitiveness should not compromise consumer protection
A recent Deloitte survey found that 52 per cent of wealth and asset managers had not yet started to prepare to implement the new rules.
In a separate survey, EY found that 87 per cent of firms need to “implement key technology changes to deliver on the Duty”, but 64 per cent are “not confident” that this will be completed by the April 2023 deadline.
“Some of the industry will start from zero with implementing the Duty”, Jill Jackson, chief executive of The Big Exchange said.
“So, there are definitely challenges there. Hopefully, they can look to other peers in the industry and collaborate because we’re all trying to get to the same place and achieve better outcomes for customers. Getting more people engaged with the products on offer is a huge opportunity.”
Meanwhile, Phoenix Group director of conduct and compliance Craig Hamilton advised firms to “define what good outcomes are for you and your customers, whether you are a company with millions of customers or a sole trader, because the Financial Conduct Authority won’t do that for you.”
Read more: P2P platforms welcome “obvious” rules of new Consumer Duty