The Financial Conduct Authority has highlighted examples of improved product governance under the Consumer Duty while warning that some firms still need to do more to ensure financial products and services are designed to deliver good customer outcomes.
The regulator said firms that design products with consumers’ needs in mind are more likely to help customers make informed decisions, receive fair value and access appropriate support throughout the life of a product.
In a new review, the FCA found firms had made progress in how they design, monitor and distribute products and services since the introduction of the Consumer Duty. It said these improvements had reduced the risk of consumers buying unsuitable products and receiving poor outcomes.
The FCA cited one example where complaints relating to ATM withdrawals fell by 45% over a three-month period after a firm made information within its app clearer and improved staff training.
The regulator also found many firms had strengthened their product governance frameworks, improved monitoring of customer outcomes and taken greater responsibility for how products and services are distributed.
AREAS FOR IMPROVEMENT
Despite the progress, the FCA said some firms should further strengthen their approach to product governance.
Areas identified for improvement include better defining target markets so products are suitable from the outset, identifying emerging risks that could lead to poor customer outcomes, and improving oversight of third parties involved in delivering products and services.
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 every-day 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.”
