Payment Services and Consumer Duty February 2025

FCA Payments Consumer Duty Multi-Firm Review: Key Findings and Implications - February 2025

The Financial Conduct Authority (FCA) published its findings from a multi-firm review on the implementation of the Consumer Duty within the payments sector, involving 23 firms of various sizes and business models. The review aimed to assess how firms are adopting the Duty and ensuring better consumer outcomes in an evolving payments landscape.

Key Findings:

1. Mixed Implementation

The findings reveal a concerning trend: while just over half of the firms showed satisfactory progress in implementing the Duty, nearly half require significant improvements. This presents a potential risk to consumer outcomes, highlighting the need for a more robust and industry-wide commitment to the Duty.

2. Underestimating the Duty

A significant number of firms have failed to fully grasp the higher standards mandated by the Consumer Duty. Many firms mistakenly believe that the risks associated with payment products are lower than other financial products. As a result, they have not made the necessary adjustments or improvements in their systems, potentially leading to suboptimal consumer experiences.

3. Target Market Definition

Another critical issue raised in the review was the overly broad definition of target markets by many firms. A vague definition of target markets can hinder the ability to accurately assess risks and identify potential consumer harm. Without a precise understanding of who their products are for, firms are at risk of missing the mark on consumer protections.

4. Agent Oversight

Concerns were also raised regarding the management and oversight of agents. Many firms fail to effectively monitor agents' adherence to the Duty. This lack of supervision can allow potential risks to slip through the cracks, putting consumers at risk.

5. Fair Value Assessments

Many firms have struggled to carry out comprehensive fair value assessments. A worrying number have relied too heavily on price comparisons, neglecting to assess the overall value provided by the payment product, including additional benefits, limitations, and long-term costs for consumers.

6. Consumer Understanding

There was a general lack of robust testing and monitoring of consumer understanding of communications. Several firms relied on inadequate metrics, such as email open rates, to gauge whether consumers understood the information provided. A deeper understanding of how consumers perceive and process product information is necessary to ensure informed decision-making.

7. Consumer Support

The review also flagged deficiencies in the accessibility and clarity of consumer support channels. Issues with support accessibility were particularly concerning given the increased demand for clear and effective communication in resolving complaints, especially for vulnerable consumers.

8. Governance and MI

While most boards were aware of the Duty’s requirements, there was limited evidence of active challenge and scrutiny. Furthermore, Management Information (MI) systems were often insufficient to effectively track progress or measure the outcomes of the Duty’s implementation. Firms must enhance their governance frameworks to ensure effective oversight of Duty compliance.

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