Conversations with ChatGPT - Consumer Duty: Opportunities & Threats
25 May 2023
Not all information that appears in this article will be accurate. At time of writing, ChatGPT only has access to internet data up to March 2021, meaning that information produced after this point may not be represented in its answers. These articles are an experiment to test how ChatGPT responds to different questions that it may or may not have clear, accurate answers to.
Angela is a persona created to converse with ChatGPT.
I attended a very interesting webinar a few weeks ago which covered Consumer Duty and its impact on financial services. One of the discussion points considered the opportunities and threats of the Consumer Duty regulation.
As Consumer Duty is such a significant change for many across the Financial Services Industry, I’m very keen for an alternate viewpoint on the question. I thought to ask ChatGPT:
Is Consumer Duty a threat or an opportunity for providers and/or platforms?
ChatGPT responded:
Consumer duty refers to the responsibility that consumers have to make informed decisions about the products and services they use, and to act in ways that are beneficial to society as a whole.
From the perspective of providers and platforms, consumer duty can be both a threat and an opportunity. On the one hand, providers and platforms that fail to meet consumer expectations around social and environmental responsibility may find themselves losing market share to competitors who are more aligned. On the other hand, providers and platforms that are able to demonstrate their commitment to social and environmental responsibility can benefit from increased consumer loyalty and positive word-of-mouth marketing.
This was certainly not the answer I was anticipating, nor the answer I wanted. This is a very different definition of Consumer Duty to the FCA’s PS22/9 ‘A New Consumer Duty’ regulation that I was enquiring about. In fact, it seems to be focusing entirely on our role as individuals in society which is quite the departure!
Therefore, I reframed and rephrased the question for the benefit of ChatGPT.
I was referring to the FCA’s new PS22/9 regulation – ‘A New Consumer Duty’. How will this regulation create threats and opportunities for providers and platforms?
I was hopeful that this reframing of the question would trigger a more accurate response. ChatGPT responded thusly.
The "New Consumer Duty" regulation proposed by the Financial Conduct Authority (FCA) in the UK aims to raise standards of consumer protection and drive a culture shift in the financial services industry. Here are the threats and opportunities for providers and platforms:
Threats
- Increased regulatory scrutiny: Providers and platforms could face fines for failing to meet the standards set out in the New Consumer Duty regulation..
- Increased compliance costs: The cost of compliance with the new regulation could be significant for providers and platforms, especially smaller firms that may struggle to keep up with the new requirements.
- Loss of reputation: If providers and platforms are found to be in breach of the new regulation, it could damage their reputation and lead to a loss of customer trust
Opportunities
- Increased customer loyalty: demonstrating commitment to Consumer Duty outcomes could lead to increased customer loyalty.
- Differentiation from competitors: platforms and providers may be able to differentiate themselves from competitors that are not as committed to consumer protection.
- Improved customer outcomes: delivering better outcomes for customers could lead to increased business in the long run.
This appears to be much closer to the truth than the first response from ChatGPT - both the threats and the opportunities seem considerably more valid. The threats side of the equation seems more simple to me, but I was still keen to understand more about the opportunities.
How might firms take advantage of Consumer Duty opportunities?
Here was the response from ChatGPT.
- Develop customer-centric products and services to meet the needs of their customers, rather than solely focusing on their own profitability.
- Emphasize transparency around pricing, fees, and terms and conditions.
- Train staff on the importance of customer outcomes and ensure they are incentivized to act in the best interests of their customers.
- Use customer feedback to improve products and services.
The ‘customer-centric’ products and services leapt out at me here. From what I’ve determined previously, this is a key facet of the new Consumer Duty regulation. Developing products and services with customer needs at the centre is an interesting discussion point. I decided to delve a little deeper.
What are some customer-centric products and services that could assist with Consumer Duty?
ChatGPT provided me with several ideas for more Consumer Duty compliant products and services:
- Personalised financial advice: Financial advisors can provide personalised financial advice that takes into account the individual circumstances and goals of each customer.
- Online budgeting tools: Online budgeting tools can help customers to manage their finances more effectively, by providing a clear view of their income and expenses.
- Flexible payment options: Firms can offer flexible payment options, such as instalment plans or deferred payment options, to help customers manage their cash flow more effectively.
- Socially responsible investments: Firms can offer socially responsible investment options that align with the values of their customers.
This conversation has produced some very interesting responses, though not all of them were as I’d expected. It seems that some of the later responses from ChatGPT do not align with earlier ones on the new Consumer Duty regulations. It has been interesting to see how ChatGPT interacts and how it incorporates corrections and new pieces of information as it progresses - I'm keen to see how the technology develops over time and will continue to work out how to achieve the most valuable interactions.
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