"The UK financial system is in urgent need of systematic change if the financial health of consumers is to be at its heart."
More than half (55%) of lenders admit to being unprepared for the upcoming Consumer Duty, while six in ten (61%) say they’ll have to bring in a third party to provide support and guidance, according to new research from analytics firm, Fuse.
The FCA’s new Consumer Duty, which comes into force at the end of July 2023, requires firms to not only act to deliver good customer outcomes, but to understand and evidence whether those outcomes are being met, as well as ensure fair outcomes for vulnerable customers. It’s widely accepted as a positive move in improving consumer protections, with more than three-quarters (77%) of lenders believing that the new rules are the first step in a long journey to improving borrower outcomes.
Fuse has now launched a new product, Health Signals, to help risk and compliance teams measure financial vulnerability, predict arrears risk, and monitor the impact of financial products on their customers.
Health Signals automates vulnerability monitoring by analysing customer transaction data (via Open Banking or existing transaction data) and providing institutions with the insights needed to proactively monitor, report, and predict financial vulnerability.
This enables firms to ensure better treatment of vulnerable customers and provide rapid support to those at risk of falling into arrears, which is particularly important when considering nearly a third of lenders (32%) have seen an increase in customers defaulting on their payments in the last 12 months, with a similar proportion (29%) reporting an uptick in the number of borrowers asking for support.
The vulnerability characteristics that Health Signals has been trained to detect are based on FCA criteria, to support financial institutions to comply with the new regulation, and monitor the impact of financial products on consumers, taking action where needed to support customers.
Sho Sugihara, CEO and co-founder of Fuse, commented: “The UK financial system is in urgent need of systematic change if the financial health of consumers is to be at its heart. The Consumer Duty stands to be a powerful catalyst to kickstart this change, and it’s essential that banks and other financial institutions are well supported with the technology and expertise needed to adapt successfully to the new regulations.
“Health Signals offers unique insights into consumer vulnerability, providing firms with the tools needed to better understand their customers and boost consumer protection. We’ve developed Health Signals in collaboration with some of the UK’s most recognisable banks, ensuring the platform proactively monitors the impact of financial products. This approach represents the future of global finance, and offers unparalleled consumer protections whilst unlocking access to more affordable financial products, and building a fairer financial system for millions across the UK.”