With the deadline for implementing the Consumer Duty standards fast approaching, the FCA recently warned some firms risk falling behind due to a technology shortfall.

In its January update as to how businesses are progressing, it reported firms still have work to do and may struggle to meet the 31st July start date due to a ‘shortfall in budget or technology resource’, with no plan in place to rectify this.

The regulator’s January update was not the first time it has outlined its hopes for the part technology will play in firms implementing the standards. In a speech last September at the Consumer Protection in Financial Services Summit, Sheldon Mills, Executive Director of Consumers and Competition at the FCA, talked about his desire for the financial services industry to “harness data and digital technology” when applying the rules.

There can be a significant difference between how far along mortgage and second-charge firms are in their digital journey. Not only does this create a slower service for clients at times, but risks them missing out on the most suitable products.

Conveying information in an accessible way
At the core of the Duty is the need for borrowers to understand the products and services they sign up to and for these to meet their needs. In his September speech, Mills noted customers are often making complex choices about financial products such as mortgages “on a smartphone”.

He said: “It’s more important than ever to ensure they have the key product information, such as its features and charges, easily accessible and understandable. This is about the consumer journey, the digital user experience, as well as the disclosure of contract terms.”

A digital journey from the outset, such as the use of an app for example, can help give the borrower the information they need in a format they are familiar with, which is easily accessible and digestible. Digitalisation can also help evidence the client’s journey in a consistent and compliant way and show clearly why a certain product was recommended.

Gathering the relevant information
Another key element of the Duty that Mills has talked about is “consumer support” and the need to ensure customers are supported through “digital or non-digital methods”.

For some borrowers a digital approach will be favoured and expected, while for others, picking up the phone and speaking to someone about their application will be their preferred mode of communication. It will be about giving clients the option and catering to all needs.

As well as ensuring a client understands the recommendations being put forward, a digital approach will also help identify why a product was recommended and how it meets the client’s needs. A more automated approach allows firms to collect and gather the relevant information on a borrower quickly and accurately, with less room for error.

Understanding and evidencing clients’ needs
Open Banking will also have a role to play in adhering to the new rules. Having implemented Open Banking ourselves last year, we have seen the benefits it has brought borrowers and the business.

With the client allowing us to access their financial data, we can better assess their current financial situation and existing debt; ultimately helping us to understand their needs. It also helps when it comes to evidencing and showing why a product was best suited for them at any one time.

Having a real-time insight into a customer’s spending can help us assess their current affordability better than relying on their credit score alone.

The regulator’s report into credit reference agencies last year laid bare some of the inconsistencies between the data held by the three main agencies, plus how Open Banking can provide a more reliable insight into a borrower’s finances. Once collected, the data can also be cross-referenced and checked against other digital sources, allowing us to also cross-reference and protect against attempted fraudulent applications.

The Open Banking Opportunity
The use of Open Banking in the UK is gathering pace and now has over six million active users. In January, it was announced the UK’s six largest lenders – Barclays, HSBC, Lloyds, Nationwide, Santander and NatWest – have fully implemented the standards required by the Competition and Markets Authority (CMA) to deliver Open Banking.

This is significant and marks an accumulation of work since Open Banking was first launched in the UK in 2017. The financial services sector is still in the early stages of the Open Banking revolution yet given the onus on firms to comply with the Duty, we should see its advancement pick up pace.

A digital-led approach can help the industry meet some of the core aims of the Duty and if not already, it is likely to move technology further up firms’ agendas – benefitting both the industry and borrowers.

Matt Meecham is chief digital officer at Evolution Money