The FCA are already starting to reference the requirements of The Consumer Duty in day-to-day supervision and authorisations correspondence to firms. With less than six weeks until final rules are expected firms should by now be in their initial planning stages.
Our third article in The BDO Consumer Duty Series considers the importance of analysing customer journeys. This is a key initial phase in implementation from which the requirements of The Consumer Duty are derived.
What is a customer journey?
Customer journeys are all interactions an individual has with a firm in relation to buying and using products and services. And with financial services products often having a long lifespan, some customer journeys can last many years.
The total lifecycle of a customer journey starts when a prospective customer first sees or hears about the firm, its products, and services; all the way through to cancellation or repurchase. Along the way are the steps involved in consideration, buying, utilising, querying, and complaining. Customer interactions or touchpoints may happen through advertising, with contact centre agents, by letter, by email, and online. And they are rarely linear, in that a customer may use different channels throughout their journey. Customer journeys are supported by all communications with the customer; by the systems firms used to capture, hold, use and retrieve customer data; and ultimately by the firms’ policies and procedures.
Why is it important to map customer journeys for The Consumer Duty?
Any customer interaction has the potential to result in ‘harm’. All interactions should be identified and assessed for how good outcomes might be compromised. Root cause analysis can be used to unravel causality and propose what changes are needed to better enable consumers to achieve good outcomes. Once aggregated, across all products and services, all channels, and all target customers, this provides a total list of changes to be made. This can then be used to develop and prioritise workstreams. Adequately documenting this work also acts as evidence of a robust approach.
Mapping customer journeys is a critical stage of implementation for The Consumer Duty. It needs to be carried out early and thoroughly. Early, so that workstreams can start with sufficient time to complete by April 2023, and thoroughly, so the proposed changes are well conceived and therefore most effective in achieving good consumer outcomes.
What should I consider when mapping the customer journey?
For all interactions there are some key considerations:
- Do we act in good faith, prevent reasonably foreseeable harm, and enable consumers to meet their financial objectives ie. meet the requirements of The Consumer Duty cross-cutting rules?
- Have we considered the four outcomes of The Consumer Duty?
- How could human biases influence consumer decision-making in a way that causes harm or facilitates good outcomes?
- Are the needs of all customers considered, including those who might be vulnerable?
The role of consumer biases and how these can influence a customer journey
It is important to understand concepts such as decision-making bias, inertia, and information asymmetry. Our previous article on these concepts can be read here. This understanding needs to be applied to all customer interactions to identify where they may be an impediment to consumers. For example, making it hard to access a service or complain, making it easy to buy and difficult to cancel. Whether in branch, online, or by telephone such ‘sludge’ and ‘nudge’ practices need to be designed out where they impede good outcomes.
How to analyse customer journeys?
For all firms, there will be commonality in the approach to analysing customer journeys. This will become more complex as the range of products, services and customer types increases, but the principles will remain the same.
The FCA proposes that The Consumer Duty is about enabling target consumers to achieve good outcomes, and not necessarily about all consumers always achieving good outcomes. Firms need to be clear on who their target customers are. Target customer profiles can help to frame the thinking about whether good outcomes are being enabled or not.
First, the key stages of the customer journey with the customer touch points, communications and access point, should be documented. Next is to analyse how those touch points enable or impede good outcomes. For example, the simplicity of information, contact centre wait times and ease of website navigation. Analysis should also be done in a rigorous way that maximises data. Call recordings, web page visits, complaints data, and many other sources can all be used to inform assessments about outcomes. Where insight is lacking additional data should be sought. Carrying out mystery shopping and feedback from consumer groups or charities can also help.
To simulate ‘reasonably foreseeable harm’, firms might generate scenarios against which to assess for good outcomes. This is done most effectively when real data such as complaints is used so that any assessment is done based on something that realistically may happen rather than something that is spurious.
Outcome testing is also a useful to reveal the source of poor outcomes and in providing assurance over outcomes. Even if not used for analysis at this stage, firms will need to establish some form of outcome testing to meet the ongoing reporting requirements of The Consumer Duty.
The output of consumer journey mapping and analysis is a way for firms to demonstrate a structured and rigorous approach to implementation of The Consumer Duty, identifying any areas for improvement, or evidencing that no improvements are needed. As with other recent regulations, the FCA promote the value of using insight to benefit consumers and firms. Reflecting on the current state and taking ‘lessons learned’ will play well to meeting regulatory expectations.
How BDO can help?
We are currently supporting several clients on their Consumer Duty journey. To find out how you can start taking practical steps toward implementation, get in touch today with Richard Barnwell.