Customer Understanding of Transactions

The FCA commissioned a survey of 17 retail banks and building societies to review how firms ensure their customers understand the products they have bought.

This is in response to one of the Parliamentary Commission on Banking Standards (PCBS) recommendations that firms 'demonstrate that they are fulfilling a duty of care to their customers, embedded in their approach to designing products, providing understandable information to consumers and dealing with complaints. A bank has a responsibility to ensure that customers have had a reasonable opportunity to understand a transaction, having regard to their knowledge and personal circumstances.'

We can report that in general firms demonstrated good practice.  Examples of positive practices we observed through our survey include:

  • All firms are using customer survey findings, and many are using consumer group discussions as the basis for producing better, yet simple, future products.
  • All the responses included examples of firms finding an innovative solution, a simple solution, or actually changing (simplifying) the product itself, in order to avoid customer confusion.
  • Some banks have a more personal approach e.g. 1-to-1 calls with any complainants, which can lead to better customer outcomes.
  • Education videos online and in branch are being increasingly used to demonstrate key features and limitations in a more interactive, engaging manner.
  • For some firms, MI is available down to the individual sales personnel. This enables detailed discussions with the individual to ensure they are consistently checking for the customer’s understanding.

However, we are concerned that some firms may not effectively be distinguishing between customer understanding and customer satisfaction: a satisfied customer is not necessarily one that understands the product (despite guidance provided by firms).  It is important that firms continue to check their customers’ understanding regularly and ensure that customers are considered during the end to end life cycle of a product. The FCA will continue to monitor this area and undertake further follow up work in due course.