Financial Reform in the UK Mandates Customer Centricity
The financial crisis has forced many governments to enact rules to rein in financial processes and procedures. The United States earlier this year passed credit card reform, and just last week passed its financial reform bill, which creates a federal consumer protection agency and puts limits on fast and loose financial activity. Not to be outdone, the British government last year enacted its own set of mandates. The Financial Services Authority (FSA), which regulates banks, building societies, and credit unions, added rules designed to build confidence in the banking system. As part of the reform, financial services companies will be required to take a holistic view of their customers.
According changes made to the Financial Services Compensation Scheme (FSCS), financial services providers in the UK will be required to create a single customer view (SCV) of their customers. The FSA defines a single customer view as "a single and consistent view of all aggregate customers deposits for each eligible claimant." Each customer record must include a unique customer identifier, the customer's name, address, type of products purchased, account balance, account status, and any secondary account holder information.
The main objective of the mandate is to standardize customer data to streamline processes in the event a bank fails and the FSA must compensate customers. But it is also an opportunity for forward-thinking companies to operationalize customer centricity.
The first reporting deadline is July 31, 2010, and full compliance must be achieved by January 2011. However, with more than 800 deposit holding institutions in the UK to which the FSCS reform applies, most are not ready, or even aware of the changes they will need to make.
A survey released last week from DataFlux found that 50 percent of the 61 respondents only began the significant undertaking to develop an SCV during 2010. Only 59 percent of respondents were at all aware of the requirement. In addition, 28 percent of respondents could not identify who owned the SCV within their organization.
Yet they do agree the mandate will help efficiency and overall customer effectiveness. Respondents said an SCV benefited a variety of business functions, such as the back office (80 percent), risk management (64 percent) and the revenue generating departments (40 percent). However, only 14 percent saw an SCV project as a strategic opportunity to deliver benefits above and beyond compliance, which shows a lack of actual customer-centric thinking on the part of banks.
The survey found that the biggest barriers to compliance were a lack of business commitment, a lack of resources, poor-quality data and a lack of guidance. In addition, data-related issues were viewed as the most challenging to overcome, with poor-quality legacy data and data quality management earning a 'difficult' rating. Respondents also cited a lack of guidance from the regulator as a barrier to compliance.
At 1to1 we constantly illustrate how a customer focus can benefit both customers and the business over the long term. Only time will tell if the regulations will be the catalyst for the banking industry in the UK to become more customer-centric.
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