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The Financial Conduct Authority (FCA) is currently running a consultation in respect of the supervision of financial promotions issued via social media platforms. Here are a few of our thoughts.
The Financial Conduct Authority (FCA) is currently running a consultation in respect of the supervision of financial promotions issued via social media platforms. The aim of the guidance is twofold; firstly to clarify the ways in which organisations can use social media for promotions and still remain within the compliance regulations, and secondly to provide guidance on social promotion in character-limited social media outlets.
Whether running competitions, promoting new products or simply highlighting services, social media is potentially a very effective form of communication for financial services, and other, firms. But because social media is an instant form of communication and is easily rebroadcast, all it takes is one breach of confidentiality or one incomplete answer to a question and what is meant to be a quick and simple communication can turn into a serious breach.
Often the problem arises when employees don’t stop to consider that most social media communications take the form of a public broadcast rather than a private message. Whilst training in the ‘do’s and don’ts’ of social media communication will help, unless employees are fully engaged with the values and ethos of the organisation they may not always look to couch communications in a way which is helpful to the customer and still promotes the organisation in a good light.
But this is only one part of the story. In many instances social media and digital technology are intertwined with smart phone and tablet use driving mobile communication. To meet this digital demand, organisations need to find ways to develop social media and digital platforms which will drive customer experiences. The old rule-bound, everything documented in triplicate, days are over. Customers expect more, demand more, and organisations seeking to provide outstanding customer experiences have to step up and use every tool in the digital box to drive innovation.
Let’s just take one simple example, that of customer identification. Without going into the complexities of money laundering regulations, how is it that some financial services organisations are still expecting customers to present certified copies of identity documents whilst others can carry out the necessary due diligence via access to computer records?
After all there is nothing wrong in using computer records where appropriate. There are a number of organisations which offer electronic checks which meet money laundering regulations and best practice guidance; and in the vast majority of cases using electronic means of identification would be both proportionate and in the interests of the customers.
It is true that the FCA 2012/13 anti-Money Laundering report was fairly scathing about the way in which banks were managing risk; but in general those risks related to high value transactions, not to the private individual who has not moved house for twenty years and has a small deposit account. And yet we have heard of cases where financial organisations have merged and customers have then been barred from making any transactions in the new organisation until they have provided fresh identification documentation, simply because the transferring organisation failed to pass on the documentation which it previously held. How is that either proportionate or in the best interests of the customer?
But that is only one example. The scope for business to open up digital pathways is vast and encompasses new products, new operating pathways and new ways of communicating. From global to hyperlocal, the scope for easy access fast communications allied to flexible products is virtually limitless. But change will only happen if the culture of the organisation moves away from back-covering rule bound obsessiveness and towards an innovative culture which is designed to empower employees and deliver great customer service.
This doesn’t mean that compliance goes out of the window. Compliance still has a key role to play in protecting individuals, organisations and the country, but perhaps that compliance should be drawn up to promote risk-based proportionate actions rather than sledgehammer cover-all actions which create vast paper trails and do nothing to protect the interests of the majority of individuals.
The FCA’s current review is targeted at the compliance implications of digital and social media as the pathway of choice for customer communication and specifically for financial promotions. In the light of this being a consultation about social media, the FCA is tweeting key comments via #smfca and in the process illustrating how the use of attachments and pictures can enhance the ability to produce character-limited messages which still cover compliance regulations. Hopefully, once the review has concluded the guidance issued will help organisations to see that there is another way to interact with customers and this will act as a catalyst for innovative solutions being offered via digital platforms.