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The Consumer Duty and the Role of Data in Regulatory Compliance

Monitoring consumer outcomes is now a critical priority for financial services firms. While firms are expected to deliver fair value to their customers, many are struggling to navigate the complexities of effective oversight. Challenges, including data gaps to inconsistent monitoring approaches, are undermining firms’ ability to assess if they are truly meeting client needs. This presents significant risks to both regulatory compliance and customer trust.

The FCA’s Expectations on the Use of Data and Technology

The Financial Conduct Authority (“FCA”) has established clear and stringent expectations for the use of data and technology, underscoring the critical role these elements play in safeguarding consumer interests and ensuring market integrity.¹ The regulator has explicitly stated that firms must leverage a broad and diverse range of data sources to assess consumer outcomes effectively, ensuring the insights derived are comprehensive, accurate and reflect the complex nature of consumer behaviour.

This approach requires firms to incorporate more innovative and varied sources, such as transactional data, social media interactions, behavioural analytics and even alternative data to gain a well-rounded view of consumer experiences and needs.

The FCA has also emphasised the importance of integrating advanced technologies such as artificial intelligence (“AI”), machine learning and automation into the data analysis process.² These tools enable firms to process large volumes of data more efficiently, identify trends and patterns that may not be immediately apparent, and make informed decisions that ultimately protect consumers and improve outcomes.

However, the regulator has made it clear that merely adopting these technologies is not enough; firms must ensure that they have robust data strategies in place to effectively manage, analyse and interpret the data they collect.³

Technological Change: A Challenge and an Opportunity

The rapid advancements in automation offer powerful tools that enable businesses to capture and process vast amounts of data in real time, providing a deeper understanding of consumer behaviour, preferences and trends. This enhanced capability allows firms to make data-driven decisions with greater accuracy and efficiency, driving better outcomes across all areas of the Consumer Duty, as well as customer satisfaction, marketing, and product development.

Inaccurate or outdated data derived from legacy systems can lead to erroneous decisions as they do not provide a real time or holistic view on data, while irrelevant or overly complicated data may cloud the true insights needed for strategic planning. Furthermore, extracting actionable insights from complex datasets requires advanced analytical skills, expertise and ultimately more time.

To successfully navigate these complexities, businesses must develop a clear and well-executed data strategy focusing on data governance, ensuring the proper collection, storage and management of data. A strong data strategy requires cross-functional collaboration. Teams must align on objectives and share expertise to turn raw data into actionable insights.

Enhancing Compliance and Consumer Outcomes Through Data, Oversight and AI

Defining what good consumer outcomes look like is essential for firms to ensure long-term value. To achieve this, firms must have robust systems and processes in place to identify vulnerable customers early, track their circumstances in real time and provide proactive, timely assistance.

The FCA has raised significant concerns about the lack of transparency and data sharing between product manufacturers and distributors in the financial services sector.⁴ Manufacturers often lack visibility into consumers’ experiences at the point of distribution, making it difficult to assess whether products deliver the intended outcomes. Meanwhile, distributors may not have access to the data required to understand how well products perform post-sale or how consumers engage with them over time.

To address these issues, the FCA expects boards to take an active role in overseeing compliance with the Consumer Duty and firms should incorporate consumer outcome data into regular reporting, board meetings and decision-making processes to ensure strategic initiatives align with consumers’ best interests.⁵

By integrating multiple data sources — such as complaints data, transactional insights and behavioural analytics — firms can build a more complete view of customer experiences and outcomes. This enables firms to identify areas for improvement, measure the success of interventions and to understand the factors that contribute to positive or negative consumer outcomes.

AI and machine learning technologies further enhance this approach by allowing firms to process large volumes of data efficiently, identify emerging risks and automate compliance analytics. These tools can help firms detect patterns that may indicate potential consumer harm, predict behaviour and identify at-risk individuals — mitigating harm before it escalates, ensuring better consumer protection and regulatory compliance.

Strengthening Governance, Board Oversight and Data Integration

For effective governance, firms must ensure board members have direct access to comprehensive, real-time consumer outcomes data and this data should inform decision-making processes. Boards must integrate outcomes monitoring into their governance frameworks, holding leadership accountable for continuous improvements in consumer outcomes.

To meet the FCA’s expectations, firms must establish clear data-sharing protocols with distributors to track product performance and consumer outcomes across the entire distribution network. By integrating manufacturer and distributor data, firms can gain a comprehensive understanding of how products perform in the market and how consumers interact with them. This enables them to assess whether products deliver fair value and make necessary adjustments to improve outcomes.

Conclusion

End-to-end outcomes monitoring solutions will help firms design and implement robust frameworks which align with the FCA expectations. An effective approach involves a thorough assessment of current data, systems and processes to identify gaps and develop customised frameworks to track and evaluate consumer outcomes across all touchpoints.

Firms that invest in robust, data-led monitoring frameworks will not only meet regulatory requirements but also enhance customer trust and differentiate themselves in the market. The FCA’s scrutiny of outcomes monitoring will only intensify, making it imperative for firms to act now to ensure compliance and consumer protection. Delaying, or waiting to see what others do, will have a significant impact on an organisations long-term success.

Footnotes:

1: Financial Conduct Authority, FCA Consumer Duty Final Guidance (FG22/5).

2: Sheldon Mills, “Using data to deliver good outcomes,” Financial Conduct Authority, February 2024.

3: Financial Conduct Authority: “Artificial Intelligence in Financial Services,” October, 2022 [Research Note: AI in UK financial services | FCA].

4: Financial Conduct Authority Policy Statement PS22/9, July 2022.

5: Financial Conduct Authority, Retail Banks and Building Societies, February 2023) [Supervisory correspondence | FCA].