Introduction
The UK’s Financial Conduct Authority’s (FCA) introduction of the Consumer Duty regulations in July 2023 offers significant lessons for industries beyond financial services. While primarily focused on protecting consumers of financial products, the overarching principles, fair treatment, clear communication, and customer-centric design, are also in play for sectors like telecoms through the financing of devices. In an industry often criticised for complex contracts, unclear pricing structures, and varying levels of customer support, adopting these principles could drive better customer outcomes that also fuel competitiveness and trust.
At Firstsource, we believe that Consumer Duty is coming to the non-FS sectors; it is just a matter of time. This thought leadership piece explores how the UK telecoms sector can benefit from embracing the core principles of the Consumer Duty regulations ahead of the curve.
Understanding the Shift: From Principles to Outcomes
The Consumer Duty shifts the regulatory landscape from a principles-based approach to one that prioritises measurable consumer outcomes. For the telecoms sector, this means going beyond treating customers fairly and taking proactive steps to ensure that products and services align with the needs of different customer segments. This would, for example, require mobile phone companies to explain how the pricing and length of their contracts provide value to all customers
Telecom companies face significant regulatory scrutiny regarding competition and pricing, but this approach could drive a more customer-centric culture. By adopting the four key Consumer Duty outcomes, telecom operators can set new standards of care for their customers:
1. Consumer Understanding: Simplifying Complex Choices
Telecom consumers often face bewildering choices, ranging from bundled packages to mobile plans with hidden fees or restrictions. Much like financial products, telecom services increasingly offer long-term contract commitments, and consumers may struggle to compare offerings or fully understand the costs and benefits. Simply contracting for a new phone can easily trigger monthly plan changes that are not fully explained or understood, causing unexpected customer charges.
The FCA’s call for clear and timely information could translate into simplified contracts, transparent pricing structures, and better comparison tools in the telecoms sector. For example, mobile phone operators could introduce clear, concise summaries of contract terms, including early termination fees or data usage limitations. Ensuring customers have a clear understanding of these terms before signing up and throughout the customer journey would not only build trust but also reduce complaints and improve customer satisfaction. This is already starting to happen as Ofcom bans mid-contract price rises linked to inflation, beginning in January 2025.
2. Products and Services: Tailored to Consumer Needs
The telecoms sector has often been criticised for one-size-fits-all offerings that may not serve individual needs. As Consumer Duty emphasises designing financial products for specific target markets, telecom providers would benefit from segmenting their services more effectively.
Through data analytics, telecom companies can understand customer behaviour and preferences and create more bespoke, personalised packages for different user profiles—whether for heavy data users, occasional callers, or those seeking budget-friendly options. For instance, many families prefer packages with shared data plans and parental controls, while professionals often prioritise speed and reliability.
The key lesson from the Consumer Duty is that providers should avoid pushing unnecessary or inappropriate products on consumers. Telecom companies could leverage insights from usage data to proactively recommend more suitable plans, ensuring customers aren’t paying for services they don’t need.
3. Consumer Support: Proactive and Accessible
Long wait times and unhelpful support systems are common complaints in the telecoms industry. The Consumer Duty regulation places a high value on ensuring that customers receive adequate support throughout their relationship with a service provider. For telecom companies, rethinking their customer contact strategy and delivery can provide a more responsive, efficient, and personalised experience.
By monitoring the digital journeys in-app or online, telecom providers can proactively reach out to those customers who are evidencing “frustration triggers” such as repeatedly accessing or hovering on the same pages. The telecom consumer is ideally placed to be contacted on their mobile device via digital channels, offering personalised deals or answering questions. Not only will this avoid complaints, but it will also improve customer satisfaction, conversion rates, and customer retention.
Additionally, telecom providers should ensure that vulnerable customers are effectively identified and receive the support they need, offering multiple digital and non-digital channels to cater to different accessibility requirements or complex issues such as financial difficulty.
4. Price and Value: Delivering Fair Exchange
Pricing transparency remains a significant issue in the telecoms sector. Hidden fees, variable charges, and unclear terms can leave customers shortchanged. The Consumer Duty’s focus on ‘Price and Value’ requires firms to demonstrate that their pricing structures deliver fair value relative to the benefits provided.
This means being clear about what customers are paying for and ensuring that they receive tangible benefits for those costs. For example, broadband providers could offer guarantees on service uptime or fixed refund policies for extended downtime that are provided without the need for a customer claim and align with their value proposition and customer expectations.
Embracing Data and Technology for Better Outcomes
Fundamental to this enhanced level of service and care is the data analytics used to identify opportunities to promote ‘consumer duty’ and the technologies to present these opportunities to the consumer when they are valid. Real-time monitoring of service performance, predictive analytics to anticipate customer needs, and customised communication strategies that engage customers at the right time with the right message are examples of how consumer duty principles can transform the customer experience.
The ability to track the value these deliver ensures both compliance with the principles of consumer duty and the benefit to the business in customer satisfaction, reduced contact, and early warnings of potential major issues. Additionally, these insights would inform better product development, more responsive customer service, and, ultimately, greater customer loyalty.
Conclusion: A Path to a More Customer-Centric Telecoms Industry
Rather than something to be feared, the FCA’s Consumer Duty regulations principles are an opportunity to transform customer care. Focusing on more transparent communication, more tailored product offerings, proactive support, and fair pricing can improve consumer outcomes and enhance brand loyalty and market competitiveness. Incorporating these principles will ensure regulatory compliance and offer the chance to lead the industry in delivering exceptional value to customers.
