Central Bank outlines five key risks for consumers in 2023 

In its Consumer Protection Outlook Report for 2023, the Central Bank has outlined five key drivers of consumer risk, for consumers of financial services in Ireland.

Cybersecurity and developing technology, ineffective communication from financial services providers, and today’s changing economic landscape are all amongst the key risks highlighted by the Central Bank for consumers.

In its Consumer Protection Outlook Report for 2023, the Central Bank has outlined five key drivers of consumer risk, for consumers of financial services in Ireland.

These are namely the changing operational landscape, ineffective disclosures to consumers, technology-driven risks, poor business practices and weak business processes, and the impact of shifting business models.

The second report of its kind since the launch of the Central Bank’s new strategy, the key risk drivers identified for 2023 are substantially unchanged from last year, although the report notes there are “significant changes in the environment influencing these risks”, such as the rise in cost of living, interest rates, and continuing developments in digital financial services.

As already highlighted in a letter to financial firms last November, the changing operational landscape of the war in Ukraine, inflation and the post-pandemic recovery, is listed as a key driver of risk for consumers this year, and the Central Bank has said it expects firms to consider the best interests of consumers in their commercial decision making.

The report also outlines that as the financial services sector continues to innovate, ineffective disclosure is a risk driver for consumers. The Central Bank said that regulated firms will need to ensure their communication and advice to consumers is clear, to support consumers in making well-informed decisions, in particular around unregulated products such as crypto assets which “carry significant risk”.

In terms of technology, the report notes that cybersecurity and the potential for technological delivery to be a focus for frauds and scams continues to be a key concern. The Central Bank also noted a “heightened risk of financial exclusion” for consumers in 2023, as new financial services technology could prevent access to services through other channels.

The final two risk drivers for this year, shifting business models and poor business practices, relate to how firms themselves are adapting to the changing economic landscape. The Central Bank noted in its report that where firms are pursuing revenue-protecting operational and service delivery strategies, “these may not prioritise consumers’ best interests”.

It highlighted how this can lead to access challenges, difficulties around the availability of basic customer services, and a deterioration in the support traditionally provided to consumers, and said that senior management in regulated firms should “foster a consumer-focused culture so that financial services can play its proper purpose for society during this period of economic change”.

Colm Kincaid, Director of Consumer Protection with the Central Bank, said that they believe “sustained concrete action” by regulated firms to tackle the five key drivers of consumer risk “would make a material positive difference for consumers of financial services”.

The report sets out specific expectations that the Central Bank has for how regulated financial services firms should act to identify, mitigate and manage the five drivers of risk for consumers, and the Central Bank has said it will “hold firms to account to deliver on these expectations”.

Mr Kincaid said that the key to understanding risk drivers and supervising firms with respect to them will be “a continued dialogue with the firms we regulate”.

He confirmed that engagement with stakeholders following last year’s report will be continued into 2023.

Those who would like to provide their views on the Central Bank’s risk outlook for 2023 can get in touch by emailing [e-mail].