Prepare to deliver on the FCA’s Six Customer Outcomes to achieve finance growth

In developing a customer-led ethos, all areas of financing need to be considered from a customer perspective, generically and at an individual level including in the design of financial promotions, in sales interactions and ongoing service.

To ensure this approach is being delivered consistently it will be essential for dealers to maintain appropriate systems and controls to monitor whether the strategy is successful and whether customers’ needs are being met.

Standish said: “Embracing FCA regulation to ensure the fair treatment of customers consistently can create a good customer outcome and a good dealer outcome at the same time.”

The prize for dealers from embracing positive change in their approach to used car finance is threefold; compliance with Financial Conduct Authority (FCA) requirements, reputational enhancement, and financial benefits, according to Standish.

Standish said: “The vast majority of people buying a car need finance as the current new car finance penetration evidences. If dealers fail to fulfil this customer need in a compelling, timely and compliant fashion, then in today’s increasingly digital car retailing environment, they risk losing not just a finance opportunity, but the car sale as well. However, get the customer finance experience right and car buyer and dealer can benefit.”

With new car finance data indicating a finance penetration of 91.2%, while used car penetration often lingers at under 20% and at best circa 40%, there is a huge opportunity for dealers; one that can be realised by delivering good customer outcomes consistently.

MotoNovo analysis of FCA data used in the consultation paper indicates that modest improvements in used car finance penetration could offset the annual customer interest savings sought by the regulator.

However, the potential opportunity is entirely reliant upon embracing the “six good outcome principles”.

The Six Customer Outcomes

• Outcome 1: Consumers can be confident they are dealing with firms where the fair treatment of customers is central to the corporate culture.
• Outcome 2: Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly.
• Outcome 3: Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale.
• Outcome 4: Where consumers receive advice, the advice is suitable and takes account of their circumstances.
• Outcome 5: Consumers are provided with products that perform as firms have led them to expect, and the associated service is of an acceptable standard and as they have been led to expect.
• Outcome 6: Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.

Standish argues that dealers currently achieving a used car finance penetration of 20% will need only a modest improvement to 26% to offset any fall in income that might follow from lower interest rates/commission; anything beyond this is an incremental gain.

For a dealer achieving a 40% penetration, a move to 51% creates the threshold for growth.

Standish said: “Traditional personal loan providers and emerging broker and fintech channels are all seeking to gain customer approval. It is an increasingly competitive market and for many consumers that journey starts online, where used car finance from dealers is too often under-represented.

“We need to take dealer finance online with the type of the self-serve capability that customers want.

“Changing to embrace new ways of promoting and delivering used car finance to sell cars is critical. Rather than wait, dealers can make these positive changes today and we can help them to achieve them.”