FinTech West & EY Seminar 17/5 – Consumer Duty & Vulnerable Customers
At our latest in-person seminar we focused on the important topic of supporting vulnerable customers and were joined by an industry recognised speaker line up from regulation, academia and, of course, FinTech.
The event was hosted by EY in their Bristol offices, and was the second in a series of three sponsored by them. Everyone was welcomed by Ololade Adesanya, Director at EY, to the event and outlined why both supporting FinTech West and, in particular, the topic of vulnerable customers are important to EY.
Julian Wells, FinTech West & Whitecap Consulting
Julian introduced the event, which is FinTech West’s second in person seminar in recent months following our recent Metaverse event in March. He outlined that FinTech West is a representative group for the FinTech community across the South West, and strives to create a platform via which people interested in FinTech can connect and keep up to date with FinTech developments. FinTech West is also actively involved in a range of initiatives to help develop the South West’s FinTech sector, including the new accelerator being created by SETSquared Bristol, and the increasingly active FinTech work of the region’s universities.
On a national level, in partnership with our FinTech National Network colleagues and Tech Nation, FinTech West is proud to be supporting an event focused on helping Ukrainian tech talent to find work in the UK. This webinar takes place on Wednesday 25th May at 11am. More info here
Alex Roy, Director in Consulting – Regulatory Insights, EY
Consumer duty is a new phase of regulation from the FCA, representing a move from rules and principles towards outcomes. For the FS industry, this means firms need to start thinking very tactically in advance of the changes next April. Customers need to be empowered to make good choices. Alex suggests firms will need to focus on where the greatest potential harm is. It also presents an opportunity to leverage technology.
The reason for the change is the sheer volume and complexity of the 60,000 regulated firms in the UK. There needs to be more focus on data and ML, and getting firms to take more ownership of their regulatory adherence, and to be able to evidence this. The same underlying rules will remain in place, so the new outcomes framework sits above the existing rules.
Alex explained that the FCA is looking at four critical outcomes: governance of products and services, price and value, consumer understanding, and consumer support. Firms are expected to use a degree of segmentation to ensure it meets the needs of its customers, which should be reflected across the entire consumer lifecycle, creating opportunities for the use of tech-enabled approaches for personalisation and also for the use of video.
It is not yet clear how the FCA will manage the regulation and enforcement of the new regime, which is one of the key unanswered questions at present. Another key area under debate is the definition of ‘value’, which may place particular scrutiny on areas such the role of intermediaries.
Professor Sharon Collard, University of Bristol
Sharon works in the Personal Finance Research Centre, which is part of the University of Bristol and conducts research over the last 6-7 years that studies vulnerability, starting with a focus on mental health, and subsequently involving the publication of guides on topics including debt collection, lending, debt advice, and gambling. These guides aim to help share best practice.
In gambling, the PFRC’s research focused on helping people who were negatively impacted by gambling, whether this was experienced directly or indirectly. Gambling can create financial harm such as over-indebtedness, low financial resilience, and poor financial judgement, but also non-financial impacts such as relationships, mental health, health or leading to criminal activity.
Customers can be made more or less vulnerable by the actions of firms, but also by how the regulator oversees the industry. The FCA aspires for firms to design products and services to avoid potential harmful impacts. Sharon told us that one bank PFRC spoke to had found that 40% of complaints relating to gambling were from customers who felt the bank should not have lent to them, because of their gambling.
Sharon told us of their work with South Manchester Credit Union. The credit union used Open Banking data to create gambling-based analysis of spend, and sharing this with customers via Nivo, a FinTech that offers a secure messaging app.
Jonathan Barrett, CEO, Comentis
Comentis is a South West FinTech startup which is part of the FCA’s Innovation hub and is also a subject matter expert on the Vulnerability Taskforce.
Comentis enables its clients to consistently, objectively, and cost effectively identify people who are at risk. It combines clinical expertise, industry knowledge, and Fintech deployment.
Vulnerability can manifest itself in one or more of: life events, health events, resilience, or capability.
Jonathan said it is a myth that if people are vulnerable then FS firms cannot deal with them. Whilst this is not true, firms are required to be identify and understand how and why their customers are vulnerable. Identifying vulnerability is challenging for FS firms, and it is something that needs to be done not only at the time a customer takes out a product, but also on an ongoing basis.
Jonathan talked about the challenges of converting large volume of data into meaningful data that can be actionable. He explained that he feels financial services has lost the ability to look at individual customers, due to its focus on efficiency. As a result, vulnerability is handled inconsistently, subjectively, and poorly documented. The Comentis solution aims to address and correct these shortcomings.
Assessments are deployed into specific markets by intermediaries, distributors, banks, and other financial services firms.
In addition to its work in financial services, Comentis also works in the healthcare sector.
Dr Karen Elliott, Associate Professor (FinTech), University of Newcastle
Karen is an academic with a background in industry, and classes herself as a ‘pracademic’. She is a specialist in AI, ML, trust, ethics, and Corporate Digital Responsibility. Karen is an ambassador for the Digital Poverty Alliance and is currently involved in a range of research including finclusion, fintrust, and complex online harms.
Her work in finclusion is nationally recognised, and draws on Karen’s passions for mental health, dementia, and financial inclusion. This work has led to a focus on digital identity, something that many people would be excluded from due to their inability to access digital products and services.
Karen has been working with the Aster Foundation to conduct research to understand the challenges people have in applying for banking services, and their levels of trust in banks and other financial services providers.
Karen explained that Open Banking data can be deployed using real life data that eradicates some of the biases that result from ‘traditional’ credit scoring methods, which can exclude a range of people from obtaining credit, including those who are very wealthy but have never had credit facilities in the past.
Most recently, Karen has been working in the field of Corporate Digital Responsibility (CDR), which looks at how organisations can ensure they are focused on purpose and trust. This includes focusing on promoting economic transparency, promoting societal wellbeing, and reducing tech impact on the environment. These three areas of focus overlap to lead to fair and equitably access for all society, promoting a sustainable planet, and investing in the new eco-economy.
Karen has recently been involved in the winning bid for a funding call from ESPRC, which will result in the creation of a nation research network to tackle wicked problems in FinTech across the UK. Wicked problems are problems that are particularly complex to tackle. Karen and the team are seeking to link up with FinTech academics across the UK, to tackle industry-led wicked problems. Last week Karen presented to the FinTech National Network to outline the plans for the new research network, which will involve all of the regional FinTech groups across the UK.
Thank you to EY for all their support, and a big thanks to our excellent speakers and everyone who attended. We will be announcing a series of dates for future events shortly – more information to follow!
