The year ahead will see a better resourced FCA announcing and implementing reform in many different markets. It will see a focus on protecting consumers in the current economic climate and a focus on understanding newer and faster paced markets, particularly those where consumer detriment is a real risk.
In a written statement to Parliament on the 9 December 2022, the chancellor set out an ambitious list of reforms that, at any other time, the financial services sector would run towards. For many however, the prospect of further driven change may leave them wondering how their already stretched teams will cope. Reform, however, is long overdue and 2023 will see firms required to stretch their resources to ensure they are prepared for the changes ahead.
As with 2022, 2023 should see the FCA continuing to focus on the cost-of-living crisis and vulnerable customers with an emphasis on preventing consumer harm. The development of technology, innovation and sustainability also increasing in importance.
Jeremy Hunt’s 2023 vision for the UK financial services sector was made clear, he would be focusing on “taking forward the government’s vision for an open, sustainable, and technologically advanced financial services sector that is globally competitive and acts in the interests of communities and citizens”.
Reforms, Reforms, Reforms
Consumer Credit Act
There is no doubt that the reform of the Consumer Credit Act (CCA) is long overdue and for many parts of the market it is no longer fit for purpose. The consultation is now open and will close on the 17th March 2023. The consultation promises to seek alternatives which are proportionate; aligned (with the implementation of the Future Regulatory Framework); forward-looking; deliverable; and simplified.
This presents a generational opportunity to clarify many areas of consumer credit and harmonise the provision across many sectors. Firms should be prepared to consider the impact of these changes on their business. Whilst delivering an opportunity for change, there is an inevitable cost in resource and cost through relevant changes.
Environmental, Social and Governance (ESG)
Like 2022, ESG will continue to be at the forefront of the FCA’s agenda. Not only will the July 2023 implementation of the Consumer Duty support their ESG agenda, the FCA is taking a stronger supervisory role via its Q1 2023 consultation, bringing ESG ratings providers into the regulatory perimeter.
Consumer Duty implementation (by 31st July 2023) will be dominating much of this sector’s resource. The FCA will continue to consult and iterate guidance to nudge sectors towards consistent adoption of the Consumer Duty. In this regard, firms’ delivery of plans may need to be reviewed and adjusted to accommodate for these insights.
Data & Technology
The FCA continues its drive to become more data aware and will use this to gain further insights to firms and the behaviour of given markets. In line with this, the expectations on firms to have clarity over data sources and the quality and assurance of such data will be critical. Firms can expect challenge on data sets where there is inconsistency in reporting or methodologies. Further, as well as this internal data the FCA are already consulting on the provision of customer data by agencies to firms and this will present challenges to firms to align to new standards and decisioning requirements.
2023 will see the cost-of-living crisis continue to impact lives and wider society. Firms will need to be sure footed and clear of how measures are put in place for customers, delivered and monitored. The FCA will continue to pursue further data from firms and we can expect further revisions to tailored support guidance to align to customer behaviour and societal issues. The maturity of discussions around customer vulnerability will continue and firms will be required to recognise and respond appropriately to difficulties driven by the cost-of-living crisis. Through all of these driven changes and requirement on firms to focus on measuring and supporting customer outcomes, IT will play a central role and we can expect to see innovation in this space to assist firms in both delivery and on-going monitoring (in particular).