This report provides the findings from our thematic review into firms’ assessment of customer understanding of transactions delivered by retail banks and building societies to consumers.
Retail banks and building societies deliver a wide variety of financial transactions to millions of customers, from current accounts to savings, lending and investment products as well as other products and services. Consumers rely on the information provided to them to make a decision to enter into a financial transaction and will have different ways and abilities in how they understand the information they are given.
When customers fail to understand a financial transaction, this can lead to harm. For example, the transactions may fail to meet the needs of the customer or fail to deliver what they expect, which in turn can result in complaints. In response to one of the Parliamentary Commission on Banking Standards’ (PCBS) recommendations (PDF) we previously commissioned a survey of 17 retail banks and building societies to review how they assess whether their customers understand the products they have bought. This thematic review builds on the survey results and involved 18 retail banks and building societies, some of which were part of the previous survey.
The report shares examples of how some firms have responded to the PCBS recommendations. By sharing these examples we hope to help other firms in developing their approaches in this area.
Who this applies to
All retail banks and building societies delivering financial services transactions to consumers.
We found that:
- firms are increasingly alert to the importance of assessing customer understanding
- some firms have made good progress in developing practices to help ensure their customers have a reasonable opportunity to understand the 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
- practices appeared least developed in the area of online sales, but a number of firms were taking steps to develop this area further
We encourage firms to take note of the examples in the report when considering how to develop their responses to the PCBS recommendations.