In October 2024, the FCA published a multi-firm review assessing how 23 payments firms have implemented the Consumer Duty.
This review not only highlights areas where firms are doing well, but also reveals critical shortcomings that need addressing. It shows the FCA’s continued focus on holding payments firms accountable to higher standards, and makes for important reading for payment firms.
In this blog, we explore the FCA’s findings, their expectations for firms, and the steps payments firms should take to align their business with these regulatory standards.
Key Findings from the Review
Let’s take a look at some of the key takeaways from the review.
Systematic Approaches to Implementation
The FCA found that the best-performing firms took a systematic approach to implementing the Consumer Duty. They focused on identifying their target markets and clearly defining what good consumer outcomes should look like in each area of their business.
Strong governance was key. Regular management information (MI) reporting, including Red, Amber, Green (RAG) ratings, helped these firms monitor compliance effectively and spot areas for improvement. The best MI reports went beyond internal reviews to cover the activities of external stakeholders, ensuring a comprehensive approach to compliance.
A Commitment to Good Practices
The FCA found that successful firms had a clear and structured understanding of their target markets. By defining the consumer outcomes they aimed to deliver, these firms showed a strong commitment to the principles of the Consumer Duty.
Another good practice was robust compliance oversight. Leading firms made sure third parties working on their behalf followed the Duty by putting strong monitoring and accountability measures in place. They also tested customer communications thoroughly to ensure they were clear, fair, and easy to understand. Firms demonstrating good practice prioritised accessible and reliable consumer support, making it simple for customers to get help and resolve issues.
Areas that Need Improvement
While some firms have made progress, the FCA has found several areas in need of improvement. A common issue was relying too heavily on existing procedures, with some firms assuming their products posed little risk to consumers. This approach often meant fair value assessments were not thorough enough and subsequent next steps weren’t taken.
Another key problem was a lack of evidence. Many firms struggled to back up their fair value assessments or show how they were monitoring compliance with the Duty. Testing customer communications was also often insufficient, creating gaps in ensuring messages were clear and effective.
At the governance level, Board reporting needed improvement. There was little evidence that Consumer Duty Champions were raising concerns or significantly influencing decisions at the Board level.
Next Steps for Payments Firms
The bottom line is that, to meet the FCA’s expectations, payments and e-money firms need a proactive and systematic approach to implementing the Consumer Duty.
This might look like:
- Building strong governance frameworks, with regular, evidence-based MI reporting to help boards monitor compliance effectively.
- Testing customer communications to ensure they are clear and support informed decision-making.
- Strengthening oversight to ensure every part of the business meets high compliance standards.
- Offering consumer support that is easy to access, effective, and responsive to customer needs.
- Avoiding assumptions about low risk by regularly reviewing all products and services.
Final Thoughts
The FCA’s findings offer valuable insights for payments firms working to meet Consumer Duty standards.
This review is a chance to review your current practices, address any gaps, and ensure your approach is both compliant and focused on delivering good consumer outcomes. Remember: Firms should be prepared to provide their Board reports and evidence upon request, so it’s vital to take steps to prepare this information ahead of when you might need it.
As always, if your firm needs support in implementing the above, an API Compliance Consultant can help. Contact us using the form below.
