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People-focused real-time streaming data is critical to banking sector as it embraces new Consumer Duty regulations

Peter Pugh-Jones Profile picture for user Peter Pugh-Jones April 9, 2024
Confluent's Peter Pugh-Jones shines a spotlight on the new Consumer Duty rules in the UK - and why data streaming can make a big difference to customer outcomes.

Compliance rules and law regulation policy concept © anyaberkut -
(© anyaberkut -

It has been described as the biggest shake-up in financial services legislation in a decade. And yet for most consumers, last year’s introduction of Consumer Duty rules by the UK’s Financial Services Authority (FSA) would have barely raised a flicker of interest. 

According to the FSA, Consumer Duty sets “higher and clearer standards of consumer protection across financial services and requires firms to act to deliver good outcomes for customers.” 

What that means in practice is that businesses are now expected to put customers first and prioritize their needs and objectives. As consulting firm PwC explains:

The wide-ranging proposals will require firms to review their product suite, communications and end-to-end customer journey…and to consider changes in areas including governance and accountability, MI (management information) and reporting, product design, pricing, distribution, servicing and staff training - all within a challenging implementation timeframe.

For those responsible for the IT and data systems that underpin the financial services industry, it would be easy to assume that it applies to areas such as compliance, regulation and security. But these new rules aren’t solely about complex back-end systems.

Delivering good outcomes for customers

Imagine, for example, that you’re out with friends at a restaurant and you want to share the bill. For some people around the table, it’s simply a question of opening an app, tapping your screen and the bill is split.

But for those with more traditional accounts without these capabilities, this isn’t always feasible. In some cases, it may not even be possible to complete the transaction ‘in the moment’ forcing some diners to find the nearest cashpoint.

In both cases, the banking service provided is safe, secure and functional. But when they’re compared in light of Consumer Duty, there is a clear difference in terms of the customer experience. 

In other words, not only are the rules making people think about introducing technology that is robust in terms of fraud or security. It’s also getting them to consider how the systems might be used in the real world.

At the heart of the new regulations — amid the complicated syntax, rules and definitions — Consumer Duty is about ensuring that the human element is built into the technology. Indeed, it’s something that defines the new breed of digital banks — brands such as Monzo, Starling and Chase.

The role of data streaming to deliver people-centric services

In many cases, what underpins this digital banking revolution is the use of real-time data to transform the customer experience. It’s a million miles away from traditional batch processing which completes tasks at set intervals.

Instead of waiting days or weeks, real-time data — or data streaming — processes information ‘in the moment’ and at a time that is most relevant to the consumer.

The most obvious example is a simple transaction via a banking app. You could be transferring cash or paying a bill. What’s important to note is that during that transaction, data is being passed backwards and forwards between the bank and the phone.

And while it's doing so, the information is being analyzed in the moment — everything from security checks using biometrics and multi-factor authentication — to location data.

But this is just the start because harnessing the power of real-time data allows even greater opportunities for financial institutions. For example, imagine if you were just about to buy a TV set and at that moment — just as you’re hovering over the ‘pay now’ button — a message pops up from your bank offering a loan.

Why is this significant? First, you may have been about to pay with a credit card from a rival provider. This allows your bank to offer a preferential rate and, perhaps, become the loan provider rather than a rival. Then again, the offer of a loan — at that point in time — might just make the difference between window shopping for a TV and actually buying one.

Clearly, such a service would need customer consent. But it shows just what is possible when customer-focused services are matched with in-the-moment data processing.

But it doesn’t stop there. You could be about to buy an electric car (EV). Real-time processing might help to procure an instant loan. It might also be able to suggest ancillary services such as a home EV charger point, specialist EV tariff and insurance providers.

The result is that banks are able to move away from financial services and become, instead, more integrated into the everyday lives of their customers. In other words, it is able to provide services that are more people-centric. But this can only be done if data streaming is embedded in banking systems.

Complying with Consumer Duty requires a long-term vision

Of course, with any change, there is always the danger that some banks and financial services companies might take a short-term view of the new regulations. But reacting in such a way benefits no one. To maximize the opportunities, banks need to find someone with the vision to see what customer services look like — not just next year, but at the end of the decade and beyond.

It is by having that long-term vision that banks and other financial providers can put the architecture in place to make it happen. That should be the number one consideration — how best to utilize real-time data to create a customer-centric experience.

And that’s important. When the idea of Consumer Duty was first floated, many in the banking industry didn't fully understand the gravity of what was being proposed. It was almost dismissive believing that the industry was already compliant.

But as time goes on, the industry is waking up to the underlying message of this regulation. The winners won’t just be those that comply — it will be those who embrace this customer-centric approach and make it integral to their banking operation.

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