New Consumer Duty: The regulation reflecting the transformation of the automotive finance industry

This week is an important one for the industry, with the much-anticipated Consumer Duty kicking into action. I wrote previously about how the new regulation will encourage a renewed focus on customers, helping our entire industry drive even better outcomes for our most important stakeholders. A very valid reason to embrace it.

Many of us will have spent a lot of time (and rightly so) preparing and implementing our readiness plans for the Consumer Duty. For those of us within the automotive finance industry, I’ll share an observation I’ve made in that process.

The transformation happening in regulation aligns with the transformation happening within our businesses. Both share the aim of being as customer centric as possible, and both must continually evolve to meet the needs of the contemporary market.

Future proofing with digitalisation

Today’s customers have more access routes available on their journey with a brand or business than ever before. Despite how much they might wish for it, no organisation or business leader has the power or knowledge to indisputably say how a customer will reach them, and the exact interactions they will have before they get to that point.

In automotive finance customers may arrive directly, but they may equally come via a dealer. The truth is that it doesn’t matter. Or rather, we cannot let it matter. It’s imperative to have a presence offline and online, and the experience for both needs to be at the same level. One that is brilliant for the customer in question, whether they choose one or a mixture of the two.

Digitalisation brings a brilliant opportunity for the industry to make interactions with customers even better, which is the ultimate goal of Consumer Duty.

It’s important to point out that digital transformation isn’t about ripping out the old in place of the new. It doesn’t mean neglecting the core business of automotive finance. It’s about building on it and elevating it to the next level.

To give an example from my world, we’re building a new finance platform at VWFS. It’s simple to use, and it has much more intuitive technology than has been used previously, helping future-proof e-commerce, and enabling smoother integrations within systems. Ultimately these are outputs that benefit the end customer. An ambition we work towards across the entire automotive industry, our regulator too. 

Evolving what choice means for the modern customer

Choice is fundamental for a genuinely positive customer experience. Once upon a time, choice in our industry was considered only in the variety of physical vehicles available to purchase. Their size, model, brand, and age.

It means much more than that today. True choice is offering options for usership as well as ownership. Some customers might want to hire a car for two days, some for two months, while others may prefer to loan one for four years. Whether they want short term access to a vehicle or a longer-term solution, a range of products needs to be available.

Automotive finance has evolved, and is continuing to evolve, to meet that changing demand. It is not for any of us in the industry to try and influence or skew what a customer wants, but it is our responsibility to give them that choice, and to empower them to select the products that are right for them.

The changes we’re seeing in regulation reflect the changes we’re seeing in our industry. Together we are united in our shared aim of transparency, choice, and consistency, so customers can make the decision that is in their true best interest. A neat alignment with the Consumer Duty.