FCA reviews payments firms' support for vulnerable consumers under Consumer Duty

The Consumer Duty requires firms to understand their customers' needs, provide appropriate support and deliver good outcomes, and the FCA has made clear it will hold payments and e-money firms firmly to this standard.  Around half of UK adults show at least one characteristic of vulnerability, meaning firms in this sector are highly likely to have a significant proportion of vulnerable consumers in their customer base.

Good practice firms understand the scale and nature of vulnerability in their customer base, identify common vulnerability drivers such as financial resilience and digital exclusion, and embed identification across customer journeys including online and automated channels.  Some firms are already going further by piloting tools to analyse customer language in online chats and routing customers who may be in vulnerable circumstances to human agents, supporting early identification and more effective intervention.

The FCA found that some firms had policies and training in place but were not always able to show how these were working in practice, and had identified very few, or in some cases, no customers in vulnerable circumstances despite having customer bases where such characteristics may reasonably be expected.  The FCA observed that almost every firm reviewed could point to policies, training materials or procedures, but noted that these alone do not guarantee customers will get good outcomes, the most successful firms went a step further by checking whether those arrangements were really working in practice.

Firms delivering good outcomes design support around identified customer needs, offer flexibility in time, channel and communication format, and apply support consistently across the customer journey. The FCA highlighted concerns where support depended too heavily on individual staff interactions or where firms could not show how vulnerability indicators translated into tailored support.

Firms delivering good outcomes communicate in ways that are clear, accessible and appropriate for their customers, tailor communications for customers in vulnerable circumstances, use different formats and channels to support understanding, and test communications to ensure they are effective and support informed decision-making.  Areas for improvement included firms relying primarily on standard communications with limited tailoring, and offering limited flexibility in how customers can engage with the firm.

Firms delivering good outcomes define what 'good outcomes' look like for customers with different needs, collect and analyse management information on vulnerability characteristics and outcomes, provide regular reporting to senior management and boards, and use MI to identify issues, carry out root-cause analysis and drive improvements.  In some cases boards received limited insight beyond annual Consumer Duty reporting, and vulnerability data and outcomes information was not consistently recorded, reducing firms' ability to identify trends and opportunities for improvement.

In payments and e-money business models where firms distribute products and services through intermediaries, firms should take reasonable steps to understand how distribution arrangements may affect customer outcomes and maintain appropriate oversight of matters relevant to their own products, services and obligations under the Duty.  Some firms had limited evidence of how outcomes for customers served through third parties were being monitored and had limited visibility of vulnerability within customer groups served by intermediaries, a significant gap given the FCA's expectations of principal firms.

Smaller firms may not need complex systems but still need to identify customers in vulnerable circumstances effectively, and if they interact with customers mainly online or through transactions, they should use proportionate processes to identify characteristics of vulnerability.  Smaller firms can take a proportionate approach to governance and MI, including using more qualitative reporting, but boards should still receive enough insight to oversee their firm's delivery of good outcomes.

The FCA has set out five questions every firm, whatever its size, should be able to answer:

1. Do we understand the vulnerabilities most relevant to our customers?
2. Are we identifying and supporting customers consistently?
3. Can we demonstrate that our approach is leading to good outcomes?
4. Where something is not working, are we learning and improving?
5. Does our board or senior management receive enough information to understand whether customers in vulnerable circumstances are receiving good outcomes?

The FCA has been explicit that answering these questions does not require extensive resources or expensive systems, but firms must be able to answer them.

The FCA will continue to engage with firms in this area and, where it finds firms are not meeting expectations, will intervene using its full range of supervisory tools.  Firms should consider the findings and examples in this publication when assessing their own arrangements and take steps to address any identified gaps, with active supervisory follow-up already signalled.