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Conduct Standard updates impacts SA's leading banks

With the Conduct Standard for Banks due to come into full effect on 3 July 2021, local financial institutions are running out of time and risk facing hefty fines for non-compliance.

The Conduct Standard, which was published on 3 July 2020 and issued under the Financial Sector Regulation Act of 2017, aims to entrench the fair treatment of customers from banks across all service platforms - including social media.

This is according to Jessica Blumenthal, an Executive at ENSafrica in the Banking and Finance department, who explains that while some of the Conduct Standard provisions have already come into operation, the remaining provisions – which includes the section regulating customer complaints – will come into force next month.

“In terms of Section 8, all banks must establish, maintain and operate a complaints management framework, which provides for appropriate complaint record-keeping, monitoring and analysis. Banks will then need to report to their governing bodies and relevant committees outlining identified risks, trends and remedial action taken.”

The Conduct Standard defines a “complaint” to include an expression of dissatisfaction relating to a financial product or service provided or offered by a bank which alleges that the bank or its service provider has treated the person unfairly. “Banks are obligated to monitor and report on all complaints falling in that definition, regardless of the medium through which they are raised. This includes social media,” notes Blumenthal.

In light of these regulatory developments, leading customer data company, DataEQ, categorised local banks’ social media conversation according to the six Treating Customers Fairly (TCF) outcomes. “We discovered that 90.7% of negative social feedback included TCF themes, which means that the vast majority of banks’ online complaints are applicable for scrutiny from the regulator,” says DataEQ CEO, Nic Ray.

While this insight helps to highlight the importance of social customer service in the banking industry, for banks – who receive millions of consumers mentions on social media each year – actually tracking and reporting on these complaints across the various social platforms is no easy feat.

“Not surprising then, was our finding that almost half of all social media posts requiring banks’ attention and action went unanswered in 2020,” notes Ray. “This highlights a critical need for banks to drastically improve their social media customer service and complaint management efforts.

“Failing to swiftly identify and respond to service requests online, exposes banks not only to regulatory risk, but also the reputational risks that such sanctions would generate,” Ray explains.

Metumo Shilongo, a Senior Associate in Banking and Finance at ENSafrica, predicts that financial institutions will need to revisit their compliance tools and processes to ensure that all possible complaints channels, including social media conversations, are monitored as required by the Conduct Standard. “As the remaining provisions become effective, this will become more pertinent,” he says.

While AI and machine learning tools can aid companies in adapting to these new regulatory requirements, Ray notes that banks will need to do more than keyword matching to prove that they are strategically analysing complaints and making meaningful operational interventions.

“This is where a human verification layer is required, which allows financial organisations to not only structure complaints against the TCF outcomes, but also understand the root causes behind the complaints,” Ray concludes.