On 31 July, the new Consumer Duty regulations introduced by the Financial Conduct Authority (FCA) will become effective.
It’s been described as the biggest shake-up to UK financial services regulation for a decade. It affects nearly all financial services firms: from banks to insurance providers and investment firms.
To protect consumers, the FCA requires companies to monitor, regularly review and assess for risks to “good consumer outcomes” at every stage of the customer journey.
To prove compliance, financial firms must be able to produce an audit trail across the entire lifecycle of every single product they offer.
And yet, close to the rollout date, the FCA has warned that preparations by some of the firms it has reviewed would not meet the new expectations.
One of the issues is that legacy IT systems were not designed to cope with the sheer volume and complexity of the data firms are now required to collect, collate, analyse and store.
It’s a huge challenge financial institutions cannot avoid facing. Nor is it a UK-only issue: regulations are being tightened around the world. Failure to comply could mean a fine running into the £billions.
At the same time, this could also be an opportunity for companies and solutions that can help financial institutions comply without needing a time-consuming and risky overhaul of existing systems.