Payments Consumer Duty Multi-Firm review
The FCA on 9 October 2024 published its key findings from its review of payment firms' implementation of the Consumer Duty, which came into force for open products and services on 31 July 2023 and for closed products on 31 July 2024.
The FCA rated around half of the firms as satisfactory and did not consider them to present a risk of significant poor consumer outcomes. The remaining half of the firms had not implemented the Duty in a satisfactory manner. The FCA noted that the most compliant firms tended to be systematic in implementation, actively scrutinising their current processes in light of the Duty whereas non-compliant firms tended to rely on their pre-existing processes and controls.
The FCA reiterated these expectations:
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Establishing a target market |
The FCA expects payment firms to specify the target market of their products to a detailed level. The FCA notes that in certain circumstances (for example low-risk products or services), a wider target market may be appropriate, but high and medium-risk products or services are likely to require more focussed target markets to limit risk of harm to customers. |
| Agent oversight |
The FCA expect firms to monitor their agents' compliance with the Duty. The most compliant firms demonstrated strong oversight arrangements which included providing agents with the information they needed to comply with their Duty. Other firms lacked this clarity. This was seen in consumer uncertainty around who to contact if they had a problem. |
| Fair value assessments |
The Consumer Duty requires firms to ensure that their products provide fair value to retail customers. A fair value assessment must be taken, evaluating whether what a consumer is paying is reasonable compared to the overall benefits they can expect to receive. The assessment considers the benefits, limitations, and total cost, including fees, of the products or services that they are offering. Better implementation included where firms explained their rationale around fair value delivery, considering different customer sets and how costs and benefits fell on those groups. Less satisfactory was reliance on price comparisons with competitors rather than a comprehensive evaluation of costs and benefits. |
| Consumer understanding |
The FCA wants firms to support their customers to enable them to make informed decisions about their products and services. Good practice includes communications tailored to retail customers, testing the clarity of communications and monitoring the impact of the communication. |
| Consumer support |
The FCA wants firms to support their customers to enable them to make informed decisions about their products and services. Good practice includes communications tailored to retail customers, testing the clarity of communications and monitoring the impact of the communication. |
| Governance |
The Duty is to be reflected in a firm's governance, strategies and incentives. Better implementation included being able to show that their boards regularly considered how well they were achieving good consumer outcomes and addressed any shortcomings. |
| Management information |
Firms are expected to test, assess and understand customer outcomes to know if they are meeting the Duty's requirements. |
The FCA recommends that firms read the review and consider how their firm performs against the above-stated metrics. It reminds firms that their Boards must review and approve an assessment of whether the firm is delivering good customer outcomes consistent with the Duty, at least annually. The FCA will continue to monitor firms' compliance with the Duty's standards and take supervisory actions where necessary.
