Firms improving design of products and services under Consumer Duty, FCA finds

Financial firms are taking positive steps to design products and services around customers to make them more inclusive and better meet their needs, according to a review by the City regulator into how the Consumer Duty is working.

Examples in the review by the Financial Conduct Authority (FCA) included a firm providing mini fridges temporarily to customers who needed one for their medication, and a firm having introduced voice control in its app for customers with dexterity issues.

In another positive example, a firm had created a version of a supplementary debit card that was limited to a specific pot of money.

This allowed caregivers to purchase essentials for other people without needing them to hand over their original card and Pin, reducing the risk of abuse.

In another case, a firm identified that customers were often confused by unclear merchant names in their transactions, leading to anxiety about fraud. The firm adopted a new data tool that instantly translated data into recognisable merchant names and logos.

The Consumer Duty, which is overseen by the FCA, was introduced in 2023, setting higher standards for financial services customers.

It requires firms to put customers at the heart of what they do, including when designing products, communicating and considering whether customers are in a vulnerable situation, due to poor health or financial difficulties, for example.

Firms must ensure the design of products and services meets the needs, characteristics and objectives of customers in the target market.

The FCA said many firms started their product or service design process by researching their prospective customers’ needs, characteristics, objectives and likely behaviour.

Some businesses also used a “negative target market” – helping them identify customers for whom the product or service would not be appropriate.

The regulator said that when products are designed with consumers’ needs firmly in mind, they can help people make informed choices, get fair value, and receive support to navigate their financial lives.

But when product design falls short, it can confuse or mislead, increase complaints and erode trust, the regulator said.

It included examples in its report to help firms learn from each other and improve compliance.

The FCA found some firms could improve how they define their target markets to make sure products are suitable and work as intended.

Some firms could also improve how they oversee third parties delivering products and services to consumers on their behalf, the regulator said.

It said some also need to give more consideration to how they can meet the needs of vulnerable customers, once they have identified who those customers are.

Charlotte Clark, director of cross-cutting policy at the FCA, said: “Consumers should be able to trust that the products and services they rely on to navigate their financial lives are designed for their needs, monitored properly, and deliver the outcomes they expect.

“The good practice we’ve found really matters because where products are poorly targeted, or firms lose sight of what’s happening across their distribution chains, consumers can lose out – whether that’s poorly performing products, slow complaint resolution, or paying for services that don’t meet their needs.”

Rebecca Deegan, director at Fair By Design, said: “At Fair By Design, we see the everyday impact when products and services aren’t designed around people’s lives, and how it can contribute to financial exclusion and the poverty premium.

“This report is a welcome and practical contribution to improving consumer outcomes.

“The examples it highlights, including the use of inclusive design principles, show how firms can move beyond identifying vulnerability to designing, monitoring and adapting services that work better for everyone.”