FCA CEO announces policies to bring forth “a new enlightenment” for financial inclusion

Nikhil Rathi, the CEO of the Financial Conduct Authority (FCA) announced new policies in a speech during the Extending Financial Inclusion event in Glasgow.

Rathi said that the current cost of living crisis requires special new policies for the financially excluded, calling it “a new enlightenment” for financial inclusion. In other words, Rathi highlighted that the FCA is aware of the financial problems of the UK citizens and intends to do something about it and make the living crisis more manageable.

Addressing financial challenges

The regulator intends to focus on issues surrounding technology, financial education, commercial incentives, and diversity. It has been found that these matters are currently rife in the financial sector and require immediate attention.

Rathi also addressed multiple current developments concerning the banking sector, which are producing additional challenges for those considered financially excluded. Some examples include the ineligibility for accessing credit products, as well as the lack of availability for cash in a world that is moving toward digital finance.

“We’ve capped the cost of payday lending, and following recommendations we made 3 years ago, we stand ready to regulate the buy now pay later sector to make sure consumers can continue to benefit from innovation and maintain access to affordable credit, whilst being treated fairly. In the meantime, we secured changes to potentially unfair and unclear terms in the contracts of Clearpay, Klarna, Laybuy, and Openpay,” Rathi noted.

The FCA leader also said that Scotland has been making major moves to improve numeracy in the country, which would make it easier for everyone to make important financial decisions. Additional plans include increased research of AI and potential solutions that this technology could offer.

Rathi believes that AI could aid the financially excluded in several ways, one of the most important of which would be monitoring digital identities to determine where additional support might be necessary.

The FCA has made moves to ensure the consumers financial wellbeing

He then moved on to talk about the regulatory action that the FCA has taken recently, outlining the Consumer Duty. He said that this concept is a major reform that the FCA introduced in July of this year, and which greatly concerns companies in the country. Essentially, the concept requires companies who reject customers to explain alternatives, and provide access to appropriate products.

The goal is not to see a reduction in the number of offered products or services that may be of interest to customers and certainly not to reduce access to them. However, if companies decide to withdraw a product or service, they must consider the impact that this decision will have on the customers.

Insurers were also instructed to cancel loyalty premiums, in addition to capping the price of high-cost short-term credit, which would save consumers with low financial resilience an estimated 150 million GBP per year.

Rathi concluded that the FCA has a wide remit and a range of powers at its disposal, but it doesn’t have access to all the levers. Some of them are controlled by the governments, others are a part of their respective industries, and some even lie with consumers themselves. However, now is the time for everyone to start working toward the same goal, and pull those levers together in order to make an impact that would make the situation better for everyone.