Editorial
The Gist
- Regulatory shift. Consumer Duty prioritizes transparency.
- Customer impact. New regulations may alter borrowing habits.
- Banking response. Proactive banks adapt, enhancing customer experience.
Every day consumers collectively receive — and all too often immediately recycle — millions of pages of jargon-filled form letters printed in impossibly small type font from their bank disclosing the terms and conditions of their account.
It’s a bit ironic that in today’s digital age in which an exceptional customer experience is measured by the fewest clicks required to complete a task, that this crucially important information is being communicated and delivered in such an inefficient and confusing manner.
In the UK, they're trying to do something about this with the implementation of the Consumer Duty, a new set of standards going into effect later this year for the financial services industry that aims to make banking more user friendly.
These new rules will require banks to clearly disclose hidden fees, provide timely customer support, and make it as easy to switch or cancel products as it was to take them out in the first place. In lieu of lengthy terms-and-conditions letters that few people read or understand, financial firms will be expected to provide straightforward information about their products and services in order to ensure consumers can make better, more informed decisions.
Will it help? That remains to be seen. But given the United States’ penchant for following in the footsteps of the UK in the financial sector, it's a fair bet that similar legislation will eventually make its way across the pond.
But rather than wait for regulators to impose their will, forward-thinking US financial institutions would be wise to consider the benefits of proactively delivering an experience where the information consumers need to make smarter financial decisions is delivered with intention and transparency.
Turning a Burden Into a Competitive Advantage
In the wake of the collapse of Silicon Valley Bank and the recent woes surrounding troubled regional banks, US banks will be left with a choice: They can either wait for Congress to pass new regulations that aim to bolster consumer protections or they can begin working now to preemptively address potential concerns before they are unilaterally foisted upon them.
But rather than look at new rules as a burden to be shouldered, perhaps there is an opportunity here for banks to "do well by doing good.’" After all, wouldn’t a bank that offers services with terms that are clearly spelled out and easy to understand by all also serve as a unique and differentiated selling point in its own right?
This of course is the paradox that any business in a highly regulated industry must reconcile: the more disclosures they are required to make, the more complicated customer communications then become.
With ambiguous new rules requiring banks to provide "clear" information to customers potentially on the horizon, banks are likely to face another headache — figuring out what actually is deemed to be sufficiently simple and understandable by all. That’s because there really is no "typical" customer — instead, there's a broad spectrum of consumers whose familiarity with banking products span the gamut from sophisticated CFOs fluent in the language of finance to those customers who refuse to bank through a mobile app.
It's hard for any industry to overcome knowledge bias, and financial services is no different. What makes sense to the people writing the rules may well be incomprehensible to the consumer. Delivering financial information that meets the diverse needs of millions of customers will no doubt be a challenge for even the most well-resourced banks.
Related Article: Show Me the Money — and Digital Experience: Bank Websites Get UX Test
Three Key Considerations for Banks Looking to Upgrade CX
For those up to the task, here are three key considerations banks should keep in mind as they look to upgrade their customers' user experience:
- Lead with clarity: One of the primary challenges banks face when communicating with customers is the overuse of complex terminology and inscrutable legal jargon that seems designed to intentionally confuse. Financial institutions should aim to simplify their language, using clear, concise and easily understandable terms to explain their products and services. This may involve reevaluating and rewording lengthy terms and conditions, simplifying fee structures, and using infographics or visuals to aid comprehension. By making their communications more accessible, banks can bridge the knowledge gap between industry professionals and everyday customers.
- Personalize the user experience: Recognizing that customers have varying levels of financial literacy and familiarity with banking services is likewise crucial. Banks should strive to personalize communication and tailor it to individual customer needs. This can be achieved through the use of AI-powered tools and data-driven insights that consider customers' preferences, financial knowledge and banking history. By delivering personalized and relevant information, banks can ensure that customers feel more informed, empowered and confident in their financial decisions.
- Build trust through transparency: Establishing trust and transparency requires consistent, proactive communication across all channels. Banks should ensure that their messaging is uniform across online platforms, mobile apps, physical branches and customer service interactions. Regular updates on product features, fees and any changes to terms and conditions should be provided in a timely manner. Additionally, financial institutions should proactively educate customers on potential risks, rewards and best practices for using their products and services.
Related Article: How AI Is Being Used for Consumer Education in Banking
UK's New Consumer Duty: Catalyst for Transparency and Shifts in Financial Habits
The introduction of the Consumer Duty and similar regulations in the UK could lead to significant changes in consumer behavior and financial industry practices. By emphasizing transparency and accountability, these regulations have the potential to empower consumers to make informed financial decisions and hold institutions accountable for their actions.
As we look ahead to the implementation of these regulations, it's important to keep in mind the ultimate goal: to foster a more equitable, sustainable and transparent financial ecosystem. To achieve this, it will be crucial to monitor and benchmark how consumer habits evolve over time. Through this process, we can assess the effectiveness of these regulations in nudging behavior in the right direction.
Webinar
Oct
16
Agentic AI Playbook: Real-World Customer Service Use Cases You Can Deploy Now
Boost self-service by 30% and slash call volume by 63% with agentic AI.
Register
Webinar
Oct
22
Beyond Storage: Smarter Content, Bigger Impact with DAM + AI
Discover how the DAM + AI duo makes content smarter, stronger and more accessible.
Register
Webinar
Nov
6
Fix the Content Bottleneck: Build a Better WebOps Strategy
Content stalled? Dev overloaded? You’re not the only one. Learn how streamlined WebOps bridges the publishing gap.
Register
Webinar
On demand
Call Spoofing Trends Financial Institutions Can't Afford to Ignore
Don't let robocalls sabotage your customer relationships. Learn how to secure your voice channel.
Watch Now
Webinar
On demand
CMS Briefing: A Live Look at What’s Next in AI-Driven Platforms
Learn how leading organizations are using AI‑driven tools to publish faster, personalize smarter and stay secure.
Watch Now
Webinar
On demand
Ready or Not: How Data-First Organizations Are Unlocking Agentforce Potential
Learn how to cut through the noise, activate Agentforce and build a Salesforce AI strategy that actually delivers.
Watch Now
One potential area of impact is the way that consumers perceive and evaluate loan products. With clearer risk factors and more accessible information, there may be a shift in how consumers borrow money. This could, in turn, impact the risk profile of lenders and create a more balanced lending landscape.
While the implementation of these regulations may be challenging for some institutions, those that take proactive steps to simplify their communications and enhance their customer experience will be well-positioned to adapt to future regulatory changes. Ultimately, by prioritizing transparency, accountability and customer empowerment, we can create a financial system that works for everyone.
Learn how you can join our contributor community.
