Ireland: Digital Technology And Financial Services: Does The Consumer Protection Code Need To Be Enhanced?

Last Updated: 27 July 2017
Article by Robert Cain, Pearse Ryan and Maedhbh Clancy

On 29 June 2017, the Central Bank published a Discussion Paper: Consumer Protection Code and the Digitalisation of Financial Services.

The Central Bank is seeking feedback on whether, as new technologies emerge, consumers availing of retail financial services are sufficiently protected by the Consumer Protection Code (CPC) in its current form, whether CPC needs to be enhanced, and whether any part of the CPC might impede technological innovations that could ultimately benefit consumers.

Digital technology is transforming retail financial services, and the Central Bank is assessing the risks involved.

Consumers are increasingly moving towards the use of online and mobile platforms for financial services, and the Central Bank has quoted from March 2017 research regarding the use of contactless payments in Ireland. It has also noted the impact of social media, the role that price comparison websites play in the UK market, the emergence of FinTech and the effect this is having on the traditional business models of Irish banks, the development of payment technology and the likely development of technology-enabled solutions (RegTech) to enable firms to deal with their regulatory obligations and manage their compliance risks.

The Discussion Paper focuses on six key areas of the CPC and how those areas might be affected by the digitalisation of financial services:

  • access;
  • provision of information;
  • suitability;
  • complaints-handling;
  • claims-handling; and
  • record-retention/record- keeping.

If any policy proposals arise out of the feedback to the Discussion Paper, they are likely to form the basis of a Central Bank Consultation Paper in 2018.


While the Central Bank notes that the digitalisation of financial services can benefit consumers in a number of ways, in particular through an enhanced user experience and a greater range of products, there are concerns that it could also increase security and fraud risk, reduce access to financial services for vulnerable consumers and reduce the level of critical thinking by consumers when making decisions.


While technological innovation can result in information being presented to consumers in a more effective way, and give consumers more opportunities to engage with financial services providers through, for example, social media platforms, there is also a risk of information-overload and the inappropriate targeting of consumers who may not fully understand the risks involved in a particular product or service.


While the digitalisation of financial services may enable more customised products and services to be provided to consumers, facilitate the comparison of different products and reduce the scope for misselling, there are also a number of risks. For example, consumers may not sufficiently understand how best to use an online tool, and may incur an unsuitable level of debt if online credit is too easily available. Firms may focus too much on designing a customer "journey" that reflects its business strategy, rather than the needs of consumers.


While technological innovations could make it easier for consumers to file complaints, there is a risk that a greater number of complaints will arise directly from the use of digital technology.


While technology-driven solutions for claims-handling may lead to a more efficient and responsive process, a smaller amount of human interaction in the claims-handling process may lead to consumer detriment.


While technological innovations could result in a swifter and more efficient retrieval process, security and fraud risks could be heightened as a result.


Specific feedback has been sought on a number of points, including the following:


  • Whether other types of innovation in the retail financial services sector should be considered beyond those referred to in the Discussion Paper?
  • What innovations are most likely to develop, and what innovations are most likely to impact consumers?

Risks and Benefits:

  • What risks and benefits are most likely to materialise for consumers from the digitalisation of financial services?

Existing Protections:

  • Are consumers already sufficiently protected in the area of access to financial services, or could protections be enhanced?
  • Are consumers already sufficiently protected in the area of provision of information, or could protections be enhanced?
  • Are consumers already sufficiently protected in the area of suitability, or could protections be enhanced?
  • Are consumers already sufficiently protected in the area of complaints-handling, or could protections be enhanced?
  • Are consumers already sufficiently protected in the area of claims-handling, or could protections be enhanced?
  • Are consumers already sufficiently protected in the area of record-retention, or could protections be enhanced?
  • Should other parts of the CPC be amended to address risks arising from the digitalisation of financial services?

Other Points:

  • Should other "new" related risks be addressed by the CPC i.e. cybersecurity, and does any part of the CPC impede technological innovation?
  • Should the Central Bank impose further obligations on regulated firms regarding the use of digital technology in a positive manner and the development of "digital journeys" that support good outcomes for consumers?
  • Should the Central Bank be more innovative in how it engages with its stakeholders?

Feedback can be provided to the Central l 27 October 2017.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.

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