The good people at the Oxford English Dictionary describe robots as computer-programmed machines that carry out a series of complex actions efficiently. Robots and other digital technologies are transforming retail financial services and consumer experiences; introducing huge benefits and significant risks in equal measure.
MMPI is intrigued to see that the Financial Regulator has waded into this conversation by issuing a discussion paper on the digitalisation of financial services. The objectives are to check if existing consumer protections are adequate to meet the demands of digital technology. Or to parse that another way “Could consumers be conned by robots?”
Online shopping has revolutionised business models in all industries. In financial services many retail consumers interact with their bank digitally – checking balances, making payments, etc. The younger generation (so ageist – Ed) have no difficulty conducting their financial affairs through their “devices”. In the insurance world it is now common to renew policies online. If the customer experience is quicker and more convenient – where’s the downside?
The Financial Regulator is uneasy that consumers might be hoodwinked by computers and may not receive due fiduciary care and attention. There are concerns that consumers will not be given sufficient information to make an informed choice; and will, therefore, be unable to determine whether or not a product is suitable to their needs and objectives. There are also fears about how complaints and claims will be handled. These are all legitimate worries for consumers and regulators. Think how convenient it is to purchase an airline ticket online and recall how tedious it is to spot all of the tick boxes along the way to ensure that all you get is an airline ticket.
Now translate that to insurance and the absolute convenience of renewing your policy in your own space at your time of choosing. The cheapest option is always tempting and answering no to all the awkward questions is tantalisingly appealing. But, in the end, are you sure you have the most suitable product for your requirements – and will it pay out in the event of a claim?
The online purchasing of retail products like shoes, books or clothes is protected by fully returnable promises for wrong colour, wrong size, etc. But returns don’t work for financial services. Imagine returning your credit card on colour and size grounds! The Financial Regulator is right to be concerned. MMPI will participate in the digital discussion and will formally respond to the worries raised.
Our response will centre on the absolute separation of product delivery and product advice. All of the retail outlets selling their wares online concentrate on product delivery – they don’t offer advice. Consumers know what they’re buying and if they don’t like it they can send it back. The terms and conditions of purchase spell out what is known in the financial world as execution only – no advice. Robots provide an excellent means of executing financial transactions but are very poor at offering financial advice. MMPI is cheering for the humans!