What seems to be the problem: ASIC RG 271 and complaints management

by | 24 Sep 2021 | Superannuation

Financial Services and its discontents

Customers complain. Sometimes this is a reflection on the customer rather than the business unfortunate enough to be the subject of their ire. More commonly, it is an indication of a disconnect between what the customer expected and what they got. Listening to complaints, taking steps to resolve disputes, and making long term changes is an essential part of running a business. Failure to do so can sabotage a brand’s reputation and lead to regulatory and legislative consequences. It is also a missed opportunity to identify improvements to the way businesses operate and interact with their customers.

Spurred on by multiple industry reviews and research into the experience of customers lodging complaints with financial institutions, the Australian Securities and Investments Commission (ASIC) released Regulatory Guide 271: Internal dispute resolution (RG 271) in July 2020. This regulation is due to take effect on 5 October 2021, and aims to see financial services firms handling complaints in a more “fair and timely manner”. ASIC also wants RG 271 to drive the analysis of complaints to identify and address systemic issues. The key changes are summarised below:

 

What is internal dispute resolution?

ASIC makes a distinction between internal dispute resolution (IDR) and external dispute resolution (EDR). IDR refers to the in-house mechanisms that financial services firms have to deal with and resolve customer complaints. When these processes fail, the Australian Financial Complaints Authority (AFCA) can step in to resolve disputes. ASIC terms this EDR. Resolving a customer complaint generally goes one of two ways. The business may take some action to alter their product or service in a way that remedies the root cause of the customer’s complaint. Alternatively the complaint is rejected by the business (which may include an explanation and apology), which may in turn lead to escalation to another party, such as AFCA.

What does this mean for financial services firms?

To fully address the requirements of RG 271, we see firms having to do three things:

  1. Make cultural and organisational changes.
  2. Update or implement complaints management systems.
  3. Improve complaints analytics.

Cultural and organisational change

Good governance will be crucial for firms’ compliance with RG 271. Having a governance body — a complaints committee, for example — with oversight, ownership, and accountability for IDR processes will make a significant difference. This entity will also need to take responsibility for the culture around complaints. Using complaints to identify and rectify systemic issues requires a shift in attitudes towards customer complaints, at all levels. Staff need to learn to see customer complaints as a potential opportunity to improve, rather than a nuisance. Indeed, ASIC wants to see staff proactively identifying, supporting, and assisting customers who need help to make a complaint.

ASIC is placing an emphasis on the collection, analysis and reporting on data related to complaints. As such, data governance is an important element of the cultural and organisational change required to comply with RG 271. For financial services firms that are mature enough to have a formal data governance framework in place, complaints data will need to be managed as a high value data asset within this structure: data owners and stewards will need to be assigned, and standards around quality and completeness defined and enforced. For firms lacking this level of rigor in data governance, the need to realise the inherent value of complaints data and manage it accordingly should be an opportunity to consider the benefits of formalising data governance — not just for complaints.

Complaints management systems

Complaints management systems will do much of the heavy lifting in complying with the new regulatory regime. Both firms who already have a complaints management system in place, and firms who will need to implement one, should ensure that they have the following capabilities:

  • A simple and easy to use customer interface — customers should be able to lodge complaints directly into the system, through a simple and easy to use web and mobile interface. Minimising the number of clicks necessary and keeping required information to only what is needed is key.

  • Omnichannel functionality — with ASIC updating the definition of a complaint to include comments made about a firm on a channel that it owns, such as a social media account, complaints management systems will need to aggregate complaints from all channels: face to face, post, email, phone, web portal, social media etc.

  • Well-defined and appropriately automated workflows — reduced timeframes for initial responses and eventual resolution of complaints are a significant feature of RG 271. Complaints management systems will need to have these timeframes configured as parameters in workflows, with some steps automated, like the initial acknowledgement that a complaint has been received, and others notifying staff that they must complete an action.

  • Data validation — ASIC has provided guidance around the minimum data required for a complaint, including prescription of mandatory and optional data elements. The simplest way to ensure that these are captured is to validate data entry by customers and staff, forcing all mandatory fields to be entered.

  • Integration with CRM — complaints management systems should be either part of, or closely integrated with CRM. Complaints are a customer interaction and should form part of any single view of the customer.

Complaints analytics

ASIC has made it clear that even complaints resolved within 5 days must be recorded. We strongly support this, as it logically leads to more firms having richer and more complete data on complaints. Analytics of complaints data opens up potentially limitless opportunities, but will be specifically important for RG 271 in three main ways:

  1. Monitoring channels for complaints — as mentioned above, RG 271 imposes a requirement for firms to monitor channels such as social media for complaints. Advanced analytics such as natural language processing can help here. Keyword and sentiment analysis can identify posts that are likely to be complaints, which can then be automatically added to complaints management systems for human review.
  2. Identifying systemic issues — finding patterns in large sets of complaints data is a task well suited to modern artificial intelligence and machine learning. By identifying trends in the content and volume of complaints, these technologies can assist firms in determining when complaints are related to systemic issues.
  3. Reporting — ASIC has outlined a number of metrics that firms should report on in relation to complaints. Analytics capability will need to be in place to generate this reporting, and make it publicly available and easily consumable.

Conclusion

RG 271 will be disruptive for many financial services firms, and we imagine that quite a few are currently scrambling to prepare for the formal introduction of these changes. However, we believe that by re-evaluating the culture, management and reporting around complaints, firms can legitimately move from a perception of complaints as a nuisance and source of potential damage, to a tool for improving their businesses.


Kevin Fernandez leads the consulting business at Novigi, and is based in the Melbourne office. For more information about anything you’ve read here, or if you have a more general inquiry, please contact us.

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