FCA publishes thematic review on customer understanding of retailing banking products

On 17 July FCA published a thematic review on customers’ understanding of retail banking products. The review was undertaken amid growing concerns that some customers fail to understand the key features of many financial products and that this may expose them to harm.

The review covered 18 firms, and involved FCA looking at the firms’ data submissions and the visiting some to better understand their systems and practices. It covered mortgage, credit card and cash savings accounts. FCA believes that assessing customers’ needs forms part of a bank or building society’s responsibility to treat customers fairly. In the review, FCA praises firms for developing systems and practices to assess customer understanding throughout the lifecycle of a product (i.e. at the pre-sale, point of sale and post-sale stages), but acknowledges that this is driven by a desire for customer loyalty, increased business and lower complaints volumes.

FCA also observed that:

  • firms are increasingly alert to the importance of assessing customer understanding;
  • some firms are developing practices to help ensure their customers have a reasonable opportunity to understand products they have bought;
  • a few firms continue to confuse customer understanding with customer satisfaction;
  • the most developed systems and practices for checking customer understanding are undertaken post-sale, for example, through customer contact exercises; and
  • practices appear least developed in online sales, but a number of firms are taking steps to develop this area further.

FCA gives examples of how firms had reacted to the challenges in each area. The review will inform FCA’s work on retail banking business models, and FCA will consider whether it needs to return to specific issues if it identifies any areas of concern in the course of that work.