Looking back over the last decade, there have been significant shifts in the regulatory landscape for financial services. The 2024 FLA Conference took a retrospective look at the last 10 years, the transformation that has occurred, and looked ahead to key success factors of the future.
Not just a box ticking exercise
One of the key pillars of the transformation of the last 10 years is the transition by the FCA away from prescriptive regulation and toward outcome-based regulation. Instead of merely adhering to defined rules, firms are now encouraged to take accountability for the application of compliance and consider a holistic approach that involves various aspects of business operations, including governance, training, product design, pricing, engagement, monitoring, and risk management. By focusing on these areas, firms can ensure that compliance is not just about meeting requirements and avoiding fines, but about enhancing the overall customer experience.
Accountability and Consumer Duty
The introductions of regimes such as the Senior Management and Certification regime have been instrumental in creating accountability and ensuring that senior management takes responsibility for their actions.
Through adhering to these regimes, businesses have been challenged to foster a culture where all levels are encouraged to speak up and challenge processes or approaches that are no longer fit for purpose and escalate problems where they see them.
This shift toward shared accountability has enhanced transparency for all and consequently made doing the right thing for customers part of the core makeup of business operations and employment culture.
Central to the customer-centred culture is the focus on Consumer Duty. Consumer Duty was introduced to ensure consumers have confidence in retail finance markets by requiring firms to act in the best interests of retail customers, avoid foreseeable harm, and support customers to achieve their financial objectives. Twenty months since its implementation, the Duty has been embraced by the financial system, but some firms are still behind.
At the 2024 FLA Conference, the FCA encouraged all firms to continually enhance their adherence to the Duty through adopting established best practices, and encouraging firms to conduct root cause analysis and measure customer outcomes. They also continued to request feedback from firms to support the improvement of the service that the FCA themselves provide in this matter.
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Monitoring and metrics
Monitoring and metrics play a crucial role in supporting Consumer Duty. Embedding meaningful conduct risk-related management information (MI) within firms is essential in measuring customer outcomes. This involves clear ownership and accountability, reliable and consistent data, and tailored reporting that is both timely and insightful. By setting specific thresholds and comparing results, firms can gain valuable insights into their performance and identify areas for improvement.
Consumer complaints provide a valuable lens through which to view the effectiveness of these regulatory changes. Among the thousands of complaints that the FCA receives where Consumer Duty is a key theme, some of the common issues that arise are:
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Firms failing to cater to additional needs and vulnerability;
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Process getting in the way of support and progress;
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Inabilities to efficiently handle non-standard scenarios;
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Difficulties in accessing relevant information;
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Demand for more tailored communications that appropriately equip customers to make timely and informed decisions.
These insights highlight the areas where firms need to focus their efforts to best support their customers. By addressing these issues and taking responsibility for customer outcomes, firms can build trust and enhance their reputation.
Key Takeaways from the FCA's Review on vulnerable customers
In an update on Friday 7th March, 2025, the FCA published their recent review of how financial firms support vulnerable customers, particularly in light of Consumer Duty.
The review sought to assess the effectiveness of current practices and the relevance of existing guidance (FG21/1) for firms on the fair treatment of vulnerable customers.
Their review has taken a multi-faceted approach that gathered data from both consumers and firms to establish a holistic view of the current state of play across financial services.
The key findings from their review indicate that many firms have made good progress in supporting vulnerable customers, with the Consumer Duty driving a renewed focus on delivering good outcomes. Positively, these findings suggest that Consumer Duty is currently being approached as intended; not a tick box exercise, but a strategic approach to customer experience and management.
Nevertheless, as with any industry shift to new ways of working, there remains areas for continued improvement.
According to the FCA’s review, further improvements could be made in both product and service design, and outcomes monitoring. They reported that most firms the FCA engaged with in their review could not show them how they had embedded vulnerable customers’ needs into their product and service design process. Further, product and design staff do not appear to be provided with adequate vulnerability training.
Firms’ understanding of the characteristics of vulnerability also continues to be an area for development. In particular, improving experiences for customers with multiple characteristics of vulnerability. According to the FCA’s recent consumer survey data, these consumers are experiencing poorer outcomes compared with other consumers.
Across all types of experiences from ability to use the communication methods they wanted, through to quicker outcomes, consumers with multiple vulnerability drivers had fewer positive experiences than those with either no vulnerable characteristics or just one. 40% of those with multiple vulnerability drivers said they had not had any positive experiences.
From firms’ perspectives, considering the effectiveness of guidance they receive on supporting vulnerable customers, the general consensus is that the FCA guidance is proving useful. However, it was suggested that additional case studies would be beneficial, which the FCA has already responded to.
In line with this feedback, the FCA has confirmed in their statement that they will not be revising its existing guidance at this time or introducing new requirements.
Next steps for firms
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Firms are encouraged to use the FCA's examples of good practice to improve their support for vulnerable customers.
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The FCA will also continue to monitor outcomes for vulnerable customers as part of its ongoing work related to the Consumer Duty and engage with the industry to drive continuous improvement.
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Greater focus on Consumer Duty and providing better outcomes is expecting to be a central pillar of the FCA’s five-year strategy – we await further information on this in the coming weeks.
Concluding thoughts
The future of financial regulation lies in a holistic, outcome-based approach that prioritises Consumer Duty.
Through accountability, leveraging meaningful metrics, and addressing issues in response to customer complaints, firms can navigate the complexities of the regulatory landscape and deliver exceptional customer experiences. Ultimately leading to a more stable and trustworthy financial system.
How Lenvi can help
Lenvi’s fully-compliant loan management software is backed by our in-house specialist compliance team, ensuring robust regulatory adherence. Our support centre staff are also trained to identify customer vulnerabilities and signs of financial distress. As an FCA-regulated organisation, we operate under the same rigorous standards as our clients, giving them the confidence that their platform not only meets but anticipates regulatory requirements, allowing them to grow with peace of mind.
If you would like to find out how Lenvi can support your business’s growth – book a demo today.
[This article was updated on 13 March 2025]
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