Could retention techniques be banned in the UK? FCA begins investigating how firms ‘snoop’ on customers

 

UPDATE: Industry professionals speak out! 

 

Retaining existing customers is of paramount importance to FX firms, largely because it costs so much to bring new customers on board these days, and because the average lifetime value of a new customer which has little trading experience and a relatively small deposit is short.

Many companies in the retail FX sector realize that over 70% of deposits come from existing customers, and as a result, concentrate vast resources on retention, often by highly technologically advanced methods.

Today, the Financial Conduct Authority in Britain has begun an investigation into companies which harvest the personal data of their customers and effectively ‘snoop’ on their buying habits, lifestyles and consumer behavior – all important parameters for customer retention.

This probe by the FCA is currently being targeted toward insurance companies, however the method by which the regulator is conducting the probe could easily be transferred to all companies under the FCA’s regulatory remit.

The FCA is taking a close look at how insurance companies could use personal information shared on social media sites to put up customer premiums, stating that firms are going to great lengths to accrue massive amounts of personal data.

Many FX firms use retention tools that have been developed specifically to maximize customer lifetime value by not only engaging them further in the trading product that they use, but also by effectively harvesting consumer data and trading behavior, as well as checking which sites customers visit, profiling their buying and trading habits, and even putting a flag to the retention team when a particular customer is online and looking at related products, in order to initiate a call to solicit that particular customer for a new deposit whilst he is in ‘buying mode’.

The FCA has stated

“We are in the very early stages and at the moment the focus is on gathering as much information as possible. We are planning a market study to make sure our rules are right and fit for purpose. We are not predicting that the results will be all bad for consumers at all.”

The current inquiry will focus on how companies monitor consumer shopping habits as well as social media posts and searches, as well as the use of smartphone apps, many of which are very much focused on retention within our industry.