The regulatory and demand impacts on financial services in 2021
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Key Account Director Vicki Wharton outlines the unique challenges hitting financial services in 2021, and what can be done to prepare and adapt.
Ever since they industrialised their processes in the late 1990s, financial services organisations have had to address new patterns of demand. These new patterns have generated new and significant costs which included: seasonal demand, planned and unplanned peaks and troughs, tax year end challenges, the vagaries of the housing market, the economic cycle itself, not counting annual events, marketing campaigns, regulatory change and product renewals. All these factors impact activity to a greater extent than imagined. Some organisations have overcome these challenges more successfully than others – they have mastered the use of typical operational levers such as: planned absenteeism, overtime, and annualised hours. Despite these successes, very few have managed to successfully share resource across their products and functions.
Covid-19 has exacerbated this problem. We have seen an increase in vulnerable customers, and banks have needed to ramp up their capacity by 40 to 80% in relatively short timeframes, whilst ensuring they stay on top of regulatory regimes, changing consumer behaviours and cost pressures. The “rule book” has had to be partially rewritten. Firms are asking a new set of questions…
“How are we going to handle the short-term spikes in customer demand going forward, coupled with added uncertainty around consumer behaviour, while remaining on firm regulatory ground and maintaining high levels of service?”
To survive and thrive, financial firms need to adapt quickly to meet these competing priorities and renewed regulatory pressures. Naturally, there has been a drive to accelerate digitisation to offer consumers more options, and in some cases reduce the need for peak demand resourcing. Nevertheless, institutions cannot rely solely on technology to effectively manage demand. It is vital that organisations set up flexible customer support resource to adapt to and meet these challenges. Turning to these challenges, we highlight below how you can flexibly adapt to changing requirements.
Great levels of care are required for customers in difficult situations, backed by the regulators
A vulnerable customer is defined as someone who, due to their personal circumstances, is especially susceptible to financial detriment - particularly when a firm is not acting with appropriate levels of care.
The FCA have observed the following four areas for review
- Policy – Firms lack an overall policy, or use a ‘one size fits all’ approach
- Data – Lack of communication between systems or different areas of the business, leading to red flags not being addressed
- Products – A company’s products or propositions lack the necessary flexibility and customer focus
- Execution – Identifiable gaps in colleague understanding, inconsistent approaches, and a lack of proactive forbearance and TCF ('Treating Customers Fairly')
What constitutes a fair outcome for customers, and why is this important here?
The strong focus from regulators on forbearance requires even greater levels of customer care, to avoid complaints, sanction or even damage to business reputation. An appropriate caring response to a customer’s issue will build strong, enduring customer advocacy.
Spikes in demand
The unprecedented impact of the pandemic on customer livelihoods will have a significant knock-on effect on financial activity requirements, particularly in areas such as collections, which saw notable spikes in 2020. In addition, operational resilience is – quite rightly - a long-term focus for the regulators, and not something to be dealt with as a one-off in 2021.
This requires a serious rethink of priorities and resource strategies, to meet the increased demand. This is especially true of 2021, but wise companies will recognise the benefit of putting long-term strategies in place to ensure swift adaptability and flexibility in their operations.
We have observed many financial operations adapting and responding quickly to the changing consumer demands and behaviour. This has not been easy to schedule and plan, and has unfortunately led to sub-optimal service levels and customer experience.
In addition to rapid flexibility, other factors that should be considered include reviewing customer journeys, the need for more agile internal resourcing, and the ability to deliver additional operations management capacity.
In the short to medium term, your teams will need increased capacity to deal with changing demands, and an improved effectiveness in finding solutions for consumers, some of whom will have never previously been in financial difficulties.
Client study: financial services, summer 2020
To illustrate the services Gobeyond Partners provide, we were engaged to provide customer management support for a financial group during peak demand periods across the summer. Leveraging expertise in our wider business, we were able to create and mobilise a specialised financial services customer engagement team within days.
Gobeyond Partners provided ongoing, collaborative support and expertise for the duration of the period, ensuring the client had the operational resilience necessary to handle the increased demand. Following this successful outcome, what was initially a short-term engagement has now been extended as an adopted business model.
The world will continue to evolve in less and less predictable ways. Financial Services firms need to plan for greater resiliency and organise themselves to respond fast. The creation of flexible resourcing models should be one of their key areas of focus, in support of their transformation efforts.
Plan and implement your strategy early to stay on top of expected demand, and minimise the financial impact on your business.
If you’d like to learn more, or for any other questions, contact Vicki Wharton