The traditional model used to define a successful C-level executive is almost invariably counted in financial terms. How much revenue is the company making? What portion of the revenue can be classed as profit? What is the growth model?
This isn’t necessarily a bad thing – making money in a capitalist society isn’t morally objectionable after all. But the world has changed, and “doing the right thing” has taken on an increasing level of importance in recent years, culminating in a recent move from the Financial Conduct Authority (the UK’s financial regulator) to codify a specific set of behaviours.
This New Consumer Duty demands that regulated industries deliver good outcomes that are reasonable for their customers. Suddenly revenue, growth, and profitability aren’t the only metrics used to define a successful business leader – a detailed understanding of what the customer really needs is now mandatory as well. And based on new joint research by Quadient and Signal, it appears that being reasonable with customers is very different than just knowing how to make money from them.
Only 2 in every 25 customers actually understands you
As an example, nearly half (47%) of respondents to our survey feel that they do not have a strong grasp of the content and meaning of the communications they receive from their bank.
That may sound concerning, but it gets worse. Only 8% of those respondents were then able to use the same communication to correctly calculate a simple answer based on the information provided. Suddenly “nearly half” appears to be an unachievable target rather than an embarrassing benchmark.
Putting that into perspective for a theoretical financial institution with a million customers or members, only 80,000 of them are likely to be able to accurately manage their own financial affairs based on the way that the industry communicates to them. That leaves 920,000 potential claimants under the new rules – even though 530,000 thought that they knew what all of those complex financial terms meant.
The 3x factor
To deliver better outcomes for consumers, it is important to fix the critical communication issues so that the delivery of your message achieves its intended purpose. Our research shows that writing personalised content using behavioural best practices improves customer understanding by over three times. When coupled with simpler product design and a general increase in the volume of educational communications, the effect would be transformative.
Delivering the communication on a channel that may be appropriate for the customer may seem obvious, but 3 in 4 (76%) consumers do not always receive their communications via this route. Ignoring a customers need could be frowned on from a regulatory standpoint, and serious questions will be raised as to whether “well we didn’t have that channel, so we used another” should be considered reasonable behaviour when the company chose to increase those traditional profitability metrics instead of investing in better technology to meet reasonable expectations.
Half of your customers want you to be more proactive
Even for the very best organisations, one unfortunate and yet universal truth remains – no consumer is likely to care as much about any communication as the person that wrote it. Even with every best practice fully deployed, a percentage of communications will not be read, often just because the recipient happened to be busy at that time, or they put it somewhere safe to read later and then misplaced it. Sadly, financial communications just aren’t that interesting when there are so many alternatives available.
There’s an acknowledgement of this in the results to our survey, with over 50% of the respondents stating that they would like to receive communication nudges before significant events so that they had additional chances to be aware of and prepare for impending changes. Unfortunately, many current communication solutions at financial institutions are limited in their capabilities, offering no opportunity to meet this request from consumers. Again, questions will be begin to be raised as to why this situation exists when technology is available to close the gap, and whether it is down to the prioritisation of profit over meeting customers’ needs.
The rules that keep on giving
The reasonableness tests laid down by the FCA are deliberately amorphous, to ensure that the rules automatically adapt to changing customer needs in future. That constant adaptation therefore needs to be built into the day-to-day culture of every organisation that is subject to the rules and underpinned by technology and process that helps to deliver results every day, rather than treating the New Consumer Duty as a one-off project. Those traditional metrics of revenue, growth, and profitability are still fine, but there’s now a legal “right way” and “wrong way” to achieve them, and that’s not going to change any time soon.
Navigate the FCA's new Consumer Duty with Quadient's comprehensive resources
Quadient and Signal recently hosted The Consumer Duty 2.0 Webinar, which is now available on-demand. If you could not attend, this is your chance to view the insightful discussions surrounding the implications and strategies of the FCA's New Consumer Duty. Watching the recorded webinar will provide you with valuable insights from industry experts, empowering your organisation to navigate this evolving regulatory landscape successfully. The Consumer Duty Webinar 2.0 recording can be accessed here.
Read our comprehensive Consumer Duty 2.0 Report and further enhance your understanding of the FCA's New Consumer Duty. This in-depth report provides important insights, analysis, and practical guidance to help your organisation adapt to the new regulatory requirements. Gain a deeper understanding of the implications for your business and discover actionable strategies to enhance customer experiences while ensuring compliance. You can access the Consumer Duty 2 Report here.
