Nikhil Rathi, Chief Executive of the Financial Conduct Authority (FCA), recently called on industry, consumers, Government and the regulator to harness innovation to improve financial inclusion. Rathi was giving a speech at PwC’s Glasgow office.
The scale of the challenge is significant. FCA research shows 1.1 million UK adults do not have a current account, while PwC research has shown one in three UK adults may have difficulty accessing credit from mainstream lenders (a 50% increase since 2016). Added to this, cost-of-living pressures are increasing, and financial capability in the UK remains low, as revealed by PwC’s Consumer Credit Confidence report.
It’s crucial that firms harness technology, data and innovative solutions, to keep costs down and deliver products and services that are better tailored to customers’ needs.
The whole financial services sector has a vital role to play in addressing this challenge. Many firms have already invested in better supporting customers, and policymakers have introduced new initiatives, such as the Consumer Duty. There are other changes on the way too, including requirements to reimburse almost all victims of authorised push payment fraud, to maintain access to cash, and to improve the sector’s diversity and inclusion.
This represents a busy regulatory agenda. As firms navigate these changes, it’s crucial they harness data and technology to keep costs down, and better tailor products and services to customer needs.
The role of technology in improving financial inclusion
The rapid development of AI brings significant opportunities to enhance operational efficiencies and personalisation.
For example, voice analytics, already used by some insurers in the claims process, can help contact centres capture and process data from customer conversations, to better identify and monitor signs of vulnerability. Elsewhere, AI can automate tasks in accessibility testing for apps and websites.
However, human oversight and intervention must be applied to the outputs of AI, as the technology brings a number of risks which firms need to manage. The FCA will be particularly alive to the risk of unintended bias, harm or exclusion for particular groups.
Elsewhere, digital and shared solutions will be key to meeting the incoming access to cash rules. Solutions should be underpinned by intelligent data analytics to ensure banks’ product and service provision aligns to the needs, characteristics and objectives of their target market.
As firms look to enhance their support for customers and navigate consumer-focused regulations, innovation and collaboration will be key, as will learning from other jurisdictions. The FCA cites the use of AI and machine learning by a firm in India to assess customers’ creditworthiness, and the role digital identities have played in Scandinavia and elsewhere to encourage financial inclusion and tackle fraud.
I’m encouraged to see the regulator using its TechSprints as one way to work with industry to drive forward innovative solutions. The FCA’s recent event on open banking data brought forward some interesting solutions to better identify poor customer outcomes, for example by enabling firms to identify a customer’s deteriorating financial position across accounts held with multiple providers, and offer pre-arrears forbearance.
I look forward to seeing what the FCA’s upcoming sprint on financial inclusion early next year will bring, and how industry, policymakers and consumers can continue to work together to drive change.
