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

Consumer Duty Success: Financial Sector Adapts Products to Better Serve Customers

Firms improving design of products and services - A comprehensive assessment conducted by the Financial Conduct Authority reveals that financial institutions are making meaningful progress in restructuring their offerings to prioritize consumer welfare. The review examines how effectively the Consumer Duty framework—implemented in 2023—is functioning across the industry, highlighting numerous instances where businesses have reimagined their approach to product and service design.

Real-World Examples of Customer-Centric Innovation

The regulator's findings showcase several compelling cases where companies went beyond conventional practices to address specific customer needs. One organization temporarily supplied miniature refrigerators to clients requiring temperature-controlled storage for essential medications. Another enterprise integrated voice-activated controls into its mobile application, specifically benefiting individuals with limited dexterity or mobility challenges.

Perhaps most notably, a financial services provider developed a supplementary debit card featuring a predetermined spending limit. This innovation enabled caregivers to cover necessary expenses for dependents without requiring access to the primary card or personal identification number, thereby minimizing potential fraud and misuse.

Additionally, one firm recognized that ambiguous merchant identifiers in transaction records frequently caused customer anxiety regarding potential fraudulent activity. By implementing advanced data analytics tools, the company began displaying familiar merchant names and visual logos in real-time, significantly reducing consumer confusion.

Understanding the Consumer Duty Framework

Established under the oversight of the FCA, the Consumer Duty represents a significant regulatory shift aimed at elevating standards for financial service delivery. The framework mandates that organizations place consumer interests at the core of their operations, encompassing product development, customer communication, and the identification of individuals experiencing vulnerability due to health conditions or financial hardship.

Under these requirements, companies must guarantee that their offerings align with the specific needs, personal characteristics, and financial objectives of their intended customer base. The regulator noted that numerous organizations initiated their design processes by conducting thorough research into prospective clients' requirements, behavioral patterns, and expected outcomes.

Some enterprises adopted what they termed a "negative target market" strategy, which helped them identify segments of consumers for whom particular products would prove unsuitable or potentially harmful.

Benefits and Areas for Continued Improvement

The FCA emphasized that when organizations approach product development with consumer needs as a foundational priority, the results benefit everyone involved. Well-designed products enable customers to make informed decisions, receive equitable value, and access appropriate support throughout their financial journeys.

Conversely, inadequate product design can generate confusion, increase complaint volumes, and gradually diminish consumer confidence in financial institutions. To facilitate knowledge sharing across the sector, the regulator included practical examples within its report to assist companies in enhancing their compliance efforts.

Despite positive developments, the FCA identified several opportunities for advancement. Certain organizations could strengthen how they characterize their target markets to ensure products function as intended. Others needed to enhance their supervision of third-party providers responsible for delivering services on their behalf. Additionally, more attention must be directed toward understanding and addressing the ongoing needs of vulnerable customers once they have been identified.

Industry Voices on Progress and Challenges

"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."

— Charlotte Clark, director of cross-cutting policy at the FCA

Clark further explained that the practical examples documented in the review demonstrate genuine value. She noted that when products lack proper targeting or when companies lose visibility across their distribution networks, consumers ultimately suffer—whether through underperforming offerings, delayed complaint resolutions, or paying for inadequate services.

"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."

— Rebecca Deegan, director at Fair By Design

Deegan characterized the report as a valuable and actionable resource for advancing consumer outcomes. She highlighted that the examples presented—including the application of inclusive design methodologies—illustrate how organizations can progress beyond merely identifying vulnerable populations to actively designing, monitoring, and adapting their services for broader benefit.