In the last two years, it’s fair to say financial services firms have often hit the headlines for all the wrong reasons. A particularly consistent theme which has produced negative headlines has been mis-sold PPI policies.
Influential consumer activists, like journalist Martin Lewis, and the Financial Conduct Authority (FCA) themselves, are working hard to educate consumers on this issue. The FCA’s recent TV ad features an animatronic Arnold Schwarzenegger urging the public to lodge their PPI complaints before the 2019 deadline. It’s hard to miss…
And as customers become more aware of compliance and conduct issues through these activists and advertisers, they’re more likely to seek compensation from their financial services provider. With over 64 million PPI policies sold, that’s a lot of potential remediation for firms.
The true cost of compensation
Press coverage tends to focus on the amounts paid out in compensation for PPI complaints – as of August 2017 the number was estimated at £27bn. But the true cost for financial services firms is much higher. That’s because remediation operations are typically large in scale, use manual processes and are contained in discrete silos. In short, they’re expensive and inefficient.
What’s more, organisations typically set them up in haste and produce low-quality work as a result. This means extensive rework and, often, unwanted scrutiny from the regulator. There’s also the risk of poor delivery; suppliers paid on a cost-per-claim basis have no incentive to be quick and efficient.
How can RegTech help solve your compliance challenges?
Remediation needs an overhaul
Given the potential volume of remediation required, firms should now consider it as ‘business as usual’. And so, firms need to focus on improving their existing efforts quickly and get ready to deal with future remediation requirements in a more proactive and organised way.
Centralised ‘remediation hubs’ are a really effective solution. These bring together the people, processes and technology needed to support the wide spectrum of remediation activity that modern financial services firms must manage.
With a hub model you can:
Utilise agile technology solutions. Embracing new technology innovations such as robotics and AI is significantly more effective than adapting legacy, monolithic solutions for remediation effectiveness. This can reduce cost per case and improve overall quality.
Remediation isn’t going away
The FCA is in the midst of the final push on PPI, anti-money laundering failings continue and the list of candidates for the next big scandal is growing. So don’t assume the challenges posed by remediation will go away. The time to address these issues is now. In the words of Mr Schwarzenegger, the remediation challenge is more a case of ‘I’ll be back’ than ‘Hasta la vista, baby’.