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The value of social media data within the context of the Consumer Duty

Author: Jamie Botha, Head of Partnerships UK and Middle East, DataEQ

Article was originally published on the Financial Services Forum

In the dynamic landscape of UK-based financial services, the advent of the Consumer Duty has ushered in a new era of accountability and transparency. These regulations place a paramount emphasis on ensuring that financial firms act in the best interests of their customers, requiring them to demonstrate tangible outcomes that reflect a genuine commitment to consumer welfare.

Amidst this regulatory paradigm shift, the strategic leverage of social media data emerges as a pivotal asset for firms striving to navigate the complexities of compliance while simultaneously enhancing customer experiences.

Watershed moment for financial reporting

The Consumer Duty regulations represent a watershed moment in the regulatory framework governing the UK financial services sector. At the centre of these regulations is a fundamental obligation for firms to prioritise the interests of their customers, fostering a culture of integrity and accountability.

Robust data strategies are critical to ensuring compliance with Consumer Duty regulations. Firms must adopt proactive measures to collect, analyse, and interpret data effectively, providing concrete evidence of their adherence to the Duty's outcomes.

The role of social media in regulatory compliance

Social media platforms serve as a goldmine of consumer sentiment and feedback, offering a real-time, unfiltered, and authentic voice of the customer. These channels present an invaluable opportunity for performance reporting based on an often overlooked, informal "outside-in" view.

While consumer complaints on social media often signal underlying challenges within the customer journey, this data becomes particularly valuable during critical moments such as instances of fraudulent activity or customer service breakdowns, enabling firms to swiftly intervene and mitigate adverse impacts.

Jamie Botha, presents a Consumer Duty Masterclass for the Financial Services Forum. 

How the regulator is likely to use social media data

The Financial Conduct Authority (FCA) is closely monitoring how firms implement the new regulations and is taking swift action against those that fall short. A firm’s data strategy must therefore clearly outline how they identify, monitor and evidence the outcomes that their customers are experiencing. By proactively analysing social media data, firms can not only demonstrate compliance but also appease the regulator by being in-line with the Duty.

The importance of accuracy in social media data

Accurate and timely analysis of social media data is imperative for driving actionable insights and enhancing customer experiences. Today, advanced technologies such as artificial intelligence (AI) and machine learning (ML) play a pivotal role in filtering through vast volumes of social data.

While AI classifiers enable real-time monitoring, social media analysis driven purely by ML can deliver inaccurate results. Adding a further layer of complexity is the need to categorise social data against the four outcomes stipulated in the Consumer Duty. Overcoming this challenge necessitates a nuanced approach that integrates sophisticated AI data analytics with human understanding and reasoning.

Combining AI and human expertise

One solution to the challenge of correctly categorising social data against the Consumer Duty outcomes is to layer an element of human insight over the analytical work performed by machines. In other words, get real people – “a Crowd” – to refine the work done by AI.

Human beings are not only better at dealing with sarcasm and local references, they’re also better at performing granular root cause analysis required for datasets as diverse as financial services complaints. 

A case study of the UK insurance landscape

To investigate the potential impact of social media data within the context of the Consumer Duty, DataEQ collaborated with PwC to conduct a comprehensive analysis of 300 000 public social media mentions across 15 major UK insurance brands. These posts were processed using DataEQ’s unique Crowd and AI technology before being categorised according to the four identified Duty outcomes.

The findings revealed that nearly two-thirds (64.9%) of sentiment-bearing posts referenced content relevant to a Consumer Duty outcome, underscoring the rich trove of conduct-related themes inherent within social media data.

For more extensive findings, read the full UK Insurance Sentiment Index here.

This Index findings supports the idea that social media data is not only relevant in the context of the Consumer Duty but can also be used to effectively accelerate course correction by proactively signaling areas of potentially bad practice.

By harnessing social media data analysis, firms can better understand and consider their consumers' needs, stay ahead of potential issues, and create a more transparent and customer-centric environment in an increasingly digital world.

Tracking this data, however, is just the first step to evidencing the outcomes that customers are receiving. Firms need to have the necessary social data tools and processes in place to accurately identify, monitor, and support the outcomes their customers are experiencing.

When captured correctly, social media data can indeed be used to ensure that firms remain customer-focused in every aspect of their products and service delivery.