Innovating with Financial Service Customers in Mind

By now, UK Financial Service (FS) providers should have their houses in order regarding the compliance of existing products and services to Consumer Duty outcomes. But what about new products and services travelling through the innovation pipeline? Is there a plan for baking Consumer Duty into their design phase?

The author(s)
  • Caspar Tearle Innovation
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At Ipsos our innovation philosophy is rooted in the consumer. We believe that all products should be designed with the end-user considered, engaged with, and consulted during the development process. We test products and services at the idea stage, the concept stage, the prototype stage and the physical product stage, each time gauging the consumer response and advising on iterative optimisation. We believe that for a product or service to succeed in the current UK FS landscape, it needs to perform on three dimensions:

  • It needs to perform commercially: if it doesn’t make money, it is of no use to the company.
  • It needs to deliver a superior user experience: digital banks have raised the bar in this respect, and falling below expectations will impact the longer-term success of the product.
  • It needs to satisfy all four outcomes of Consumer Duty: failure to do so may result in financial penalties, but, perhaps as importantly, may result in customers voting with their feet.

Let’s look at each of these areas in a little more detail.

Commercial Success

We have 40 years’ experience of measuring FS product and service innovations, so we have a pretty good idea of what will work and what won’t. We know that consumers often find the research and purchase journey daunting (with financial literacy an increasing issue as highlighted by the vulnerability work conducted by the FCA1), and we know that the thought processes consumers go through whilst considering these products and services are a lot more deliberative than the ones they’d go through in an FMCG environment. Also, perhaps more than in any other category, inertia plays a role in decision-making.

So, to move people away from the tried and tested, successful products need to:

  • meet a deep consumer need
  • stand out from the crowd
  • remove as much ‘friction’ from the process of sign-up and usage as possible.

Products that do this are more likely to succeed commercially.

User Experience

Consumers need to feel comfortable using your products. In a world where Amazon, Google and Monzo have raised consumer expectations of user experience, a seamless, simple, intuitive, and efficient interface may not necessarily give you as much competitive advantage as it did five years ago, but it will certainly cost you if it’s sub-optimal. This is particularly true for digital products, but it impacts expectations of more traditional interfaces too.

The default consumer mode is increasingly one of impatience and it doesn’t take much (a broken menu, a painfully long hold time, or an impenetrable set of terms and conditions) for trust to be lost.

The impact of loss of trust is a dripping tap that needs very speedy maintenance. So, to use a Consumer Duty example, how easy is it for users to find out the process if things go wrong, or if the product doesn’t perform as anticipated

Consumer Duty

Evidence suggests that an increasing proportion of the UK population is becoming financially vulnerable – not just in the sense that COVID and economic slowdown have made times hard, and disposable incomes are more thinly spread, but also in the sense that sections of the population are less well catered for by the FS industry, and may be ill-prepared to understand the complexity of the products on offer to them. In fact, the latest data suggests that 47% of the population fall into at least one of the three categories the FCA defines as vulnerable2.

In a sense, Consumer Duty, itself a natural evolution of “Treating Customers Fairly”, is a way of getting FS companies to acknowledge and address issues faced by all customers, and especially vulnerable customers. By designing ‘better’ products, trust in the industry can grow. And as we know that trust leads to longer term customer relationships which brings its own financial rewards, there is a strong commercial reason for firms to embrace Consumer Duty.

Summary

Overall, adopting a consumer-centric approach to innovation brings commercial success, and has the desirable side-effect of maximising the chances that remedial action on Consumer Duty outcomes will not be needed further down the line.

For more information on how Ipsos can support your organisation in testing consumer-centric innovations, please get in touch.

 

References

  1. FCA, FG21/1 Guidance for firms on the fair treatment of vulnerable customers: Chapter 2

  2. FCA, Financial Lives 2022 survey: Chapter 2, Consumers in Vulnerable Circumstances 


Table of contents

  1. Introduction to Consumer Duty: A clear way forward
  2. Creating and Embedding Cultural Change
  3. Building Stronger Stakeholder Relationships Through Consumer-Centric Culture
  4. Innovating with Financial Service Customers in Mind
  5. Improving Consumer Duty Outcomes Through Customer Experience
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The author(s)
  • Caspar Tearle Innovation

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