A Generational Opportunity: Consumer Duty and the Power of Innovation
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In our previous article, we explored the positive outcomes demanded by Consumer Duty legislation , and how Behavioural Science can be used to achieve them . In this piece we focus on Consumer Duty as an innovation trigger, and how some enlightened organisations will reap enormous benefits from it.
As a reminder, Consumer Duty rules mean that financial service firms must ensure their products and services deliver good outcomes. While many firms already strive to do so, the Consumer Duty aims to strengthen consumer protection. It mandates that all firms must actively demonstrate their commitment to delivering good outcomes for retail customers on all open products.
Our considered view is that this latest shift in regulatory focus presents every financial institution with a golden opportunity. To explain why, let’s start by examining the real meaning of what’s changing.
In every organisation, there are product owners who are looking to innovate the services in their portfolio. This isn’t easy to do, but it’s how organisations win, so everyone wants to get better at it.
However, in financial services there’s a problem.
Today’s rules-based regulatory framework leads financial institutions to ask themselves a recurrent question, which can be simplified as, “How might we increase compliance with requirement xxx by y%?”
This is a reductive mantra which creates a negative tension: between the momentum of the product owner’s vision on the one hand, and the drag of regulatory adherence on the other.
Because when the goal is simply to achieve compliance with a set of rules, the result is a zero-sum game: more of one thing gets you less of the other.
But an outcome-based framework like the Consumer Duty encourages bolder inquiries such as, “How might we develop our products to be more engaging?”
This is a mindset shift, and we believe it has the potential to transform the fortunes of financial organisations.
Because suddenly, the product team’s vision becomes aligned with that of the compliance team. The two are now mutually reinforcing. With the right focus, more of one thing now gets you more of the other.
This is the reason why here at Gobeyond Partners we perceive the Consumer Duty as an important innovation trigger. Its whole essence is to be a departure, with organisations being asked to do things not just better, but different.
Which is as good a working definition of innovation as any.
And it leads to a big question: how do you go about doing something truly different?
Well, first of all you have to learn something new about the problem. Because what you know today was enough to survive under the rules. But now the challenge has shifted and you’re looking to thrive in a world of outcomes.
That’s going to demand new thinking; and the new thinking will need to be rooted in customers’ experience.
Here’s four great starting questions –
· What’s happening in your customers’ lives?
· What do outcomes mean to them, in theory and in practice?
· What habits and constraints are shaping their decisions and their behaviours?
· What needs do they have that remain unmet?
This type of inquiry has always been at the heart of innovation and creative problem solving. You can’t simply ask customers these questions outright, and you certainly can’t ask them, “What do you want?”, because they’re not your innovation consultants.
But with skilful conversations, you can reveal what they need – and then use a range of ideation techniques to develop creative possibilities.
For example, we recently worked with a banking client who wanted to create an app so customers could self-serve their account enquiries. When we explored with customers what they might want the app to do, we were surprised at how many said they would like it to promote sales finance products to them. They even gave clues about the best timing and content for such recommendations, transforming the vision of what the app program could become.
This process is often known as Design Thinking. The compliance department may not always have been its natural home…but as we’ve seen, the Consumer Duty is changing everything.
Now, some organisations will attempt to meet the Consumer Duty challenge using the same methods they’ve always used in the past.
And some may succeed – if success is defined merely as not breaching regulation.
But this will be to miss the generational opportunity that we believe is being presented here. Which is to reimagine customer relationships, and to see where that new road might lead.
It will likely be the road less travelled, and expert guidance will be vital.
But to get somewhere different, you have to do different things.