Summary of Summaries
Key Points
- Simplifying homeownership in IVAs is crucial for enhancing clarity and improving outcomes for consumers.
- The Consumer Duty, effective from July 31st, 2022, sets higher standards for organizations in providing good outcomes for customers and requires proactive measures.
- Leveraging technology can help validate IVAs as beneficial solutions for the right customers in debt, while also addressing overselling and commercialization challenges.
- Numeracy plays a significant role in financial vulnerability, and organizations aim to simplify numerical information to improve customer understanding.
- Collaboration, quality assurance, and external perspectives are vital in meeting the Consumer Duty and prioritizing good customer outcomes.
Key Statistics
- Over 80% of customers churn after two negative interactions with a brand.
- Approximately 34% of adults in the UK have poor to low levels of numeracy involving financial concepts.
- In randomized control trials, simplifying communications doubled customer understanding from around 20% to 40%.
- Nearly half of the working-age population in the UK has numeracy levels expected of a primary school child.
- Complaints can indicate whether customers are receiving good outcomes.
Key Takeaways
- Simplifying homeownership processes in IVAs and improving clarity can enhance consumer understanding and outcomes.
- The implementation of the Consumer Duty raises the bar for organizations, emphasizing proactive measures and better customer support.
- Leveraging technology and embracing an outcomes-based regulatory approach can positively impact the IVA industry.
- Addressing numeracy challenges through simplified communications is crucial for improving financial literacy and reducing vulnerability.
- Collaboration, quality assurance, and leveraging data are key to meeting regulatory requirements and delivering good customer outcomes.
Debt Tech: Peter Wordsworth
Summary
- Homeownership in IVAs needs to be simplified to improve clarity for consumers
- Creditors are under pressure to demonstrate good consumer outcomes
- Technology can help validate IVAs as good outcomes for consumers
- Creditor engagement and desire to change is key to improving the IVA industry
- Creditors are starting to realize the value in IVAs and their role in the process
- An outcomes-based regulatory approach would be a game changer
- Consumer duty style regulation is needed to improve IVAs
- IVAs can be a good solution for the right customers in debt
- IVAs have a poor reputation due to overselling and commercialization
- The IVA industry is playing catch up to changes in legislation and technology
- SIP 3.1 and the ban on debt packages aim to reduce overselling of IVAs
- The insolvency service review could recommend radical changes to IVAs
Get out of wrap: Consumer duty comes into force on the 31st of July – is your organisation ready
Summary
- The Consumer Duty comes into force on July 31st 2022 and aims to set higher expectations for the standard of care organizations provide to their customers.
- It requires firms to take real action to provide good outcomes for customers through a new principle and set of rules.
- It supersedes the previous Treating Customers Fairly (TCF) principle.
- Under the Consumer Duty, firms must be more proactive in helping customers, avoid unnecessary fees, and make it easier for customers to switch, cancel, or be supported.
- Initially it covers current products and services, but will eventually expand to include previously sold products.
- The Consumer Duty raises the bar for what companies must do to show they are acting in customers’ best interests.
- It provides the FCA with a clearer route for enforcement compared to the previous guidance.
- Companies need to appoint a Consumer Champion to own and be accountable for meeting the regulatory requirements.
- Quality Assurance will play a key role in demonstrating that companies are meeting the Consumer duty and prioritizing good customer outcomes.
- Companies should leverage all available data, get external perspectives, and conduct mystery shopping/deep dives to prepare for the Consumer Duty.
Statisitcs
- Over 80% of customers churn after two bad interactions with a brand.
- Complaints can indicate whether customers are receiving good outcomes.
- Empowered and autonomous frontline teams are needed to deliver good customer outcomes.
- The FCA is likely to work with companies that are making a good faith effort to meet the Consumer Duty.
- Sentiment analysis of customer interactions can provide insights into pain points.
Takeaways
- The Consumer Duty aims to set higher expectations for the standard of care organizations provide.
- It requires firms to take real action to provide good outcomes for customers.
- It supersedes the previous Treating Customers Fairly (TCF) principle.
- Under the Consumer Duty, firms must be more proactive in helping customers.
- The Consumer Duty raises the bar for what companies must do to show they are acting in customers’ best interests.
- Quality Assurance will play a key role in demonstrating that companies are meeting the Consumer Duty.
- External perspectives can help identify gaps and opportunities.
- Collaboration, information sharing, and best practice will be vital.
- Training and filling any gaps can help companies get ready.
- The Consumer Duty is an opportunity for companies to improve processes, technology, and customer experience.
- Adopting best practices for vulnerable customers will benefit all customers.
- Leveraging all available data can help companies prepare.
Arum: Plain Numbers and Financial Literacy
Summary
- Many people struggle with numeracy and understanding complex financial information.
- Organizations like play numbers work to simplify communications to improve customer understanding.
- Tailoring communications for vulnerable groups can improve outcomes but firms should first improve communications for all customers.
- The FCA’s consumer duty requires firms to consider tailored communications but implementation is challenging.
- Play numbers’ approach doubled customer understanding in trials, showing the impact of simplifying communications.
- “Maths anxiety” causes people to avoid or disengage from their finances when faced with complex numbers.
- Harsh initial communications can reduce engagement for future communications.
- Good outcomes do not necessarily mean customers understood communications.
- Comprehension is an important part of achieving good customer outcomes.
- The FCA identified numeracy as a key factor that can make people financially vulnerable.
- Organizations aim to improve numeracy by simplifying numerical information from financial firms.
- Firms often test perceived understanding rather than actual comprehension of communications.
Statistics
- Nearly half of the working age population in the UK has the expected numeracy level of a primary school child.
- The FCA itself found that 34% of adults in the UK have poor to low levels of numeracy involving financial concepts.
- In randomized control trials, play numbers’ approach doubled customer understanding from around 20% to 40%.
- Only a third or less of people were showing good understanding of original communications from financial firms.
- Up to half of the population struggles with numbers and have numeracy levels expected of a primary school child.
Takeaways
- Many people struggle with numeracy and understanding complex financial information.
- Organizations aim to simplify numerical information and help financial firms communicate better with customers who have low numeracy.
- Tailoring communications for vulnerable groups can improve outcomes but firms should first improve communications for all customers.
- Firms struggle with implementing the FCA’s consumer duty in practice.
- Play numbers’ approach doubled customer understanding, showing the impact of simplifying communications.
- There are challenges in defining and measuring “good customer understanding”.
- “Maths anxiety” causes people to avoid or disengage from their finances when faced with complex numbers.
- Harsh initial communications can reduce engagement for future communications.
- Good outcomes do not necessarily mean customers understood communications.
- Comprehension is an important part of achieving good customer outcomes.
- The FCA identified numeracy as a key factor that can make people financially vulnerable.
- Organizations aim to improve numeracy by simplifying numerical information from financial firms.
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