Takeaways from the FCA’s Consumer Duty review in payments

The FCA recently shared findings from a review of how companies in the payments sector follow Consumer Duty standards. The review looks at how companies are performing against these principles, highlighting both good practices and areas for improvement.

In this article, we summarise the key highlights from the FCA’s review.

Findings: good practices and shortcomings

The FCA report highlights positive examples where some companies excel at providing clarity and support. However, there are notable gaps where improvement is needed across the industry:

• Communication and transparency: The FCA found cases where companies do not give clear and timely information to consumers. This is especially true for complex fees or changes in terms. Some companies do well by using clear and simple language. However, others may confuse customers with complicated legal terms or vague phrases.
• Monitoring and overseeing third parties: Many payment companies depend on outside providers. This can create risks if not managed well. The review found cases where companies lacked strong oversight mechanisms, potentially affecting the customer experience and undermining accountability.
• Consumer understanding and accessibility: The FCA found that some companies actively check if consumers understand terms and conditions. However, many companies do not have good ways to monitor this. Making sure consumers fully understand the products they’re using is essential, especially for those in vulnerable situations. Some companies effectively use surveys and feedback loops to measure consumer comprehension, but this practice is not yet widespread.

Challenges in meeting Consumer Duty standards

The FCA’s report shows that meeting Consumer Duty standards requires more than policy changes. For many companies, it requires a cultural shift. Key challenges include:

• Balancing compliance and customer-centricity: Many companies struggle to embed a truly customer-centric approach in their compliance strategies. The FCA warns that focusing too much on 'ticking regulatory boxes' can cause companies to ignore consumer needs. This can lead to failing to meet the true purpose of the Consumer Duty.
• Resource allocation: Smaller companies may not have enough resources to implement full Consumer Duty measures. They might lack dedicated teams for customer oversight or advanced training programs.

FCA’s recommendations for companies

The FCA outlines several actionable recommendations to help companies close these gaps:

1. Improve customer communication: Develop clear, concise, and accessible information, avoiding jargon or complex language.
2. Strengthen third-party management: Set up strong monitoring systems for third-party providers. This will help ensure they meet Consumer Duty standards.
3. Measure and enhance consumer understanding: Regularly check how well consumers understand product terms. This is important for services with special fees or risks. Tools like surveys and direct feedback can improve this process.
4. Provide clear consumer support: Support should be easy to access and help with common problems. This ensures that companies can resolve issues quickly and fairly.

Moving forward: The FCA’s call to action

The FCA’s review serves as both a progress report and a call to action. While some payments companies have taken positive steps, there's still substantial room for improvement.

The regulator stresses that Consumer Duty should be central to the financial services industry. This means moving from just following compliance rules to truly focusing on customers. The FCA will keep monitoring how companies are doing. It expects the payments sector to adjust to meet Consumer Duty requirements.

As companies work to close these gaps, they improve compliance and build consumer trust. This trust is essential for a competitive and customer-focused financial services industry.

Read the FCA's review in full.

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