What does the FCA’s Consumer Duty mean for the design of digital products?

Customer trust in the financial services industry is waning.

The Financial Conduct Authority (FCA) intend to help change that with the Consumer Duty.

The FCA are introducing new rules (PS22/9) and guidance (FG22/5) that put customers and their needs first, through the creation of the Consumer Duty. They want to see financial services companies do more to meet their customers’ needs offering better outcomes in the process. This means providing fairer products, better supporting customers across their use of the product or service, onboarding and off-boarding customers with ease, addressing real customer needs, being aware of them changing over time, and providing clear, accurate information about products and services.

The FCA also want to see companies offer more practical help in a challenging economic climate, with easy access to online forms of finance, as well as mitigating potentially harmful trends identified within the financial services industry such as how customers are (mis)using Buy Now, Pay Later and financial domestic abuse.

Given this, the new regulation challenges companies to change their culture and behaviour. However, with plans submitted by last October and reviews set to be completed by April, are some providers still lagging behind?

Let’s first address two preliminary questions to gauge how ready a business might be to respond to the Consumer Duty and the scale of change it requires.

Question 1: How do customer needs inform digital product development?

The Consumer Duty requires financial services companies to make decisions based on customer outcomes above financial ones, so evolving products in a timely and effective manner with customer input will be crucial.

Question 2: Is the team structured in a way that enables collaboration?

Teams across the organisation from content, to legal, design, engineering and beyond need to pull together. This isn’t about one team leading the way but having a baseline understanding within each department, plus ‘champions’ who can work together with other business units to create better outcomes for customers that meet PS22/9.

Embrace the Consumer Duty

In short, the new guidance presents the opportunity for businesses to ask themselves whether their digital products are doing enough to meet customer needs while offering good outcomes, including customers who are not currently being served.

Based on this, here are four fundamental recommended actions companies should take before the Consumer Duty comes into effect in July 2023.

Understand customer needs, motivations and behaviours

Speak to customers.

In the face of the looming compliance deadline it’s not too late to conduct primary qualitative research, observational, diary studies, or use other ways of gathering insight. Formative research shouldn’t halt all other processes but can happen as part of iterating digital products.

Interviews with real users and an output framework like JTBD or personas will ensure digital products are evolved with customers in mind. These activities will examine the relationship between businesses and their customers, while considering their needs and behaviours and understanding the experience of products and services from their perspective. This is all important creative fuel in light of the regulatory shift.

Failing primary research, there are other data sources to capture the customer’s voice: customer support teams, marketing data, forums, product usage data. The main task is understanding where customers are now, in order to know where organisations need to get to, as a response to the FCA’s Consumer Duty.

The new guidelines also ask financial service companies to better consider customers with characteristics of vulnerability. It’s best practice to recruit and conduct research with these customers regardless of guidelines, industry or product; but now it’s a requirement. Affordances will need to be made to attract and protect this user group in the context of research. However, financial services companies will uncover a range of underserved needs in speaking with underrepresented customers. This will allow them to create more accessible digital products for everyone as a result.

At a product level, understanding customers should be a consistent effort. This means financial services companies should seek to learn as much as they can about their customers whether that’s before they interact with an advice article on investments or choosing a financial product from a mortgage to a loan.

The questions that need to be asked will be difficult but necessary, but questions of this kind will ensure that the customer is protected and that the product is right for them.

The Consumer Duty is being introduced at a time when it’s easier than ever for customers to put themselves in a disadvantageous position. A way of mitigating that is understanding who the product is for, how people use it and under what circumstances and then informing its evolution with that knowledge in mind.

Clear content can build trust

Clear information and customer comprehension are at the heart of the PS22/9 regulation.

That’s why content design will be integral to ensuring that experiences live up to the regulation. The FCA fear that digital products are bogged down with technical terminology with customers suffering as a result.

Given that most humans engage with the world conversationally, it’s this simplicity and clarity that financial products often lack. We recommend financial services companies look at how they interact with their customers: what they say, how they say it and check if it’s making sense to them.

Make sure important terms and technical terminology (if required at all) are thoughtfully placed in a customer journey in bitesized, well explained, chunks. Embody the mantra of telling customers what they need to know, when they need to know it, in plain language.

If more exposition is needed to aid comprehension then offer it, don’t think in terms of the reduction of the number of steps in a journey, or the amount, but rather what the customer understood as a result. That doesn’t mean flooding screens with content either, but rather, pacing journeys through progressive disclosure. If that means more screens and re-organising information then this should be prioritised.

Prioritise product roadmaps through a new lens

Gathering insight into products and services will provide an up-to-date understanding of who uses the product and what they’re trying to do.

Using the insights from research will help to identify who the ‘core’ customers are, what they’re trying to do and how successfully they’re able to do it. While also offering a level of understanding as to who is being under-served; those left with their needs unfulfilled.

Typically, better serving the needs of unrepresented groups opens up the experience for everyone, particularly given that customers are typically not constants; different contexts and life events change our ability to interact and comprehend all manner of things we have previously taken for granted. This includes financial services products, which need to be able to change and evolve with customers.

Given this, financial services companies should review planned features and initiatives that are currently being developed through a different lens. Features and initiatives can be prioritised or deprioritised by assessing the level of value they’ll bring to different customer groups and whether this value is shared across groups or is localised to one.

To remind ourselves, here are the outcomes the FCA want to see for customers:

• Fair value

• Suitable products and services

• Consumer understanding

• Consumer support

These outcomes are good themes to assess whether businesses are delivering the kind of customer value that the FCA want to see and the activities, time and money spent against them match up.

In addition, the Consumer Duty sets three cross-cutting rules which set out how firms should act to deliver good outcomes and are required to be approached holistically:

• Act in good faith towards retail customers

• Avoid causing foreseeable harm to retail customers

• Enable and support retail customers to pursue their financial objectives

Measure and evidence against customer-centric goals

An important element of the FCA’s guidelines is that companies must be able to evidence the changes made and the positive impact of them. This is the final piece in the puzzle and can be tackled by creating robust measurement frameworks that take in data from multiple sources to triangulate the outcomes of the changes for customers.

Business goals are often too far removed from the end user and contribute to poor outcomes for people and businesses as part of the financial landscape. Moreover, the FCA won’t settle for metrics like conversion rate, instead we recommend setting goals with customer outcomes in mind.

What to do about the Consumer Duty today

Back in 2017, GDPR presented an opportunity for companies to take a step back and consider more than complying to new ways of handling customer data, allowing some to evolve processes and businesses entirely through the lens of regulation while others were left behind.

In the same way, the FCA’s Consumer Duty should be perceived as an opportunity, a chance to understand how financial products are meeting customer needs and where they’re falling short.

Here’s nine quick tips on how to get started today:

1. Take the user-centred design process seriously, moving from business outcomes to customer outcomes.

2. Help promote buy in and understanding of Consumer Duty, championing it within teams quickly across content, legal, design and beyond with enough depth and rigour to make it tangible.

3. Speak to customers and understand their perspective: their needs and behaviours.

4. Analyse and understand the data on customers prioritising those who are currently underserved; who are they and what are they trying to do?

5. Products or services should ask questions to understand a customers circumstances before serving them.

6. Write in plain language and remove technical jargon, test customer comprehension and don’t fear adding more if it helps people understand things better.

7. Format terms and conditions in bitesized chunks that customers can understand throughout the journey - not at the end with a tick box.

8. Look at current business activities and organise roadmaps to serve customers first using the FCA’s outcomes (fair value, suitable products and services, suitable treatment and customer confidence) to structure this for the organisation as a whole.

9. Create a measurement framework that identifies the problems that are being solved for the customer, what success looks like and whether it’s been achieved - the FCA want to see this level of evidence.

Facing challenges with complying with the Consumer Duty? Get in touch.