New regulations, such as the Markets in Financial Instruments Directive II (MiFID II) and the Insurance Distribution Directive (IDD) include enhanced requirements around financial promotions, marketing and the disclosure of key information, such as fees and charges. Organizations consider the easiest way to meet these requirements may naturally be by generating additional paper.
Another important consideration is the General Data Protection Regulations (GDPR) which came into force in May 2018. The requirements of the GDPR, including customers’ “right to be forgotten” are causing organizations to assess how they manage data protection and privacy on their path to becoming paperless.
Though customer communication is an area in which some prescriptive requirements do apply, regulators are responding to the challenge of technological disruption by exploring how digital communication tools can be used to improve customer experience, while adhering to core regulatory principles.
An important element of regulatory requirements is the concept of providing information to customers through a ‘durable medium’, so that its integrity is maintained and accessible in future. Historically, this has led firms to provide this material information in paper form, but regulators, including the FCA, continue to look at the relevance of the durable medium definition. They have assessed mechanisms, such as the use of web-based portals or digital vaults to store customer information as part of the implementation of new regulations. So, a positive step forward.
Another approach will be to better understand the types of communication across any given transaction and reinterpret their purpose. If banks can assess their current paper-based communications and re-categorize based on their purpose1 and perceived value to customers, partners or other third parties, they may unlock a pathway for increasing the level of digital adoption, while adhering to the principles of durable mediums and respecting any remaining paper preferences.
Financial services must continue to work within the requirements. But as the industry explores ever-more innovative digital approaches – beyond just replacing paper documentation with similar electronic versions, such as pdfs stored ‘digitally’ – organizations should work proactively with regulators to maintain the principles of transparency, preference and durability. But at the same time, continue to challenge and realize the common goal of achieving customer safety without stifling innovation.