Consumer Duty: UK FCA publishes findings from review of digital design in customers’ online journeys

What should firms be thinking about and how can Hogan Lovells help?

Some key themes from the FCA’s review findings are:

• the importance of designing digital customer journeys to meet target customers’ needs (including identification and support of vulnerable customers);
• use of positive friction to drive good outcomes; and
• use of testing and analysis of the ‘significant amounts of data’ generated by digital journeys to help improve their design and customer outcomes.

The combination of our legal and consulting teams is ideally suited to assist you in reviewing your current digital customer journeys, and how these might have to be improved. Our combined offering can provide you with a full range of services, and clear guidance on how the solutions can be applied within your business.

Why did the FCA carry out the review?

The FCA points out that use of apps and digital platforms has changed customer journeys, including how customers engage with firms, apply for products and borrow money.

Following its research on digital design and sludge practices, which looked at the effect that harmful digital design practices - such as sludge and deceptive design - can have on how consumers make financial decisions, the FCA wanted to consider how firms acquire customers through digital channels and how they are delivering good customer outcomes under the Consumer Duty.

It therefore worked with a small number of firms to review their digital acquisition journeys and their app and website design.

What did the FCA find?

The FCA is keen to emphasise that while the findings of the review relate only to consumer credit providers, there is good and poor practice that might be of interest more broadly to firms with a digital presence.

In outline, the FCA found that:

• The design of digital platforms can encourage customers in a specific direction and can influence their understanding of products and features; and
• The design can really support good consumer outcomes when used well, but customers can also be driven towards making quick decisions which may not be in their best interests or consistent with the Consumer Duty.

Key points identified by the FCA include:

Design aspects

While some firms had carefully considered the design of their digital platforms and were proactively reviewing and updating them, others should be looking at:

• How they design journeys to meet their target customers’ needs, including considering the level of support needed by customers and whether they would benefit from additional help and alternative communication channels. Good practice here includes involving frontline agents in the design of digital journeys and support, allowing them to provide feedback based on customer interaction.
• Ensuring that the design of digital journeys enables the identification of and support for vulnerable customers, including testing how easily customers can disclose vulnerabilities or ask for additional support.
• How they can use positive friction in journeys to drive good outcomes (eg by helping customers to take time to make fully informed decisions before applying for credit).
• Avoiding exploitation of consumers’ biases in the layout and choice of architecture on platforms by considering the potential effect of, for example, pre-selected defaults, incentives or the promotion of certain choices.
• Clear and timely presentation of key information about products, eg fees and charges. Good practice here includes the use of images and videos to help explain key information about products and how they work.

Different customer groups

Overlapping with some of the design aspect considerations above, the FCA reiterates that under the Consumer Duty firms are expected to understand the needs, characteristics and objectives of customers in the target market. This should inform the design of the product and customer journeys. The FCA points out that:

• Target market analysis can help firms to better understand the different needs of customer groups, including the needs of customers acquired through different channels, those who need additional support, and those with characteristics of vulnerability.
• The effectiveness of support channels can be reviewed by firms through testing and customer insights.

Testing and quality assurance

Linked to the above points on design and different customer groups, areas for improvement in relation to testing and quality assurance more generally include:

• Testing of key product information (eg features and fees) for customer understanding.
• In relation to complex products, ensuring that the language used makes it clear that the product is aimed at a narrow target market. Simplified language (eg through the use of accessibility software to review apps and websites) does not always lead to improved customer understanding. The FCA also directs firms to paragraph 4.17 of its Final non-Handbook Guidance for firms on the Consumer Duty (FG22/5). Among other things, this guidance states that firms offering more complex products and services ‘should take extra care to promote, and monitor, customer understanding’. By way of example, firms selling products which are only likely to be appropriate for a narrow target market ‘should design the customer journey to make this clear and equip customers for whom the product is not designed to understand this’ or introduce ‘positive friction’ to the sales process. In terms of good practice on language use in general, in its review findings the FCA highlights those firms who extensively test the language used in their website, apps and promotions, and feed this into their product design and governance.
• Testing whether end-to-end journeys enable customers to fully understand the product and its features, including looking at how apps operate on different devices or operating systems. Firms should also be aware that different device settings may affect how customer journeys appear and how well they support customer understanding.
• Using testing and assurance activity to check that customers have the opportunity to read and understand the information provided (ie ensuring an appropriate level of ‘positive friction’).
• Testing how different customer groups, and their respective journeys, achieve good outcomes.

MI and oversight

The FCA reminds firms that the Consumer Duty requires them to monitor and regularly review customer outcomes. It points out that digital journeys produce ‘significant amounts of data’ to help with this process. In particular, it noted during its review and engagement with firms that analytics software can provide firms with data that gives ‘deep insight’ into the customer journey, eg. identifying steps on a journey with a high dropout rate, such as the point at which customers are asked to enter payment details. It therefore suggests that firms look at:

• Analysing data on customer journeys to help in improving the design of digital journeys and customer outcomes; and
• Using multiple indicators to measure success, rather than relying too heavily on positive online review ratings which are unlikely to be sufficient for firms to understand outcomes across their customer base. See, for example, the point under ‘Design aspects’ above on use of feedback from frontline agents (which is also relevant to general testing and quality assurance).

What’s next?

The FCA encourages firms to consider how the design of customer journeys can affect customer understanding and their decisions when applying for credit.

Firms should note that the FCA also intends to continue to monitor firms' approaches to digital journeys and app design. It will also consider how the design of digital products and services offers the required level of support and customer understanding when it engages with firms about the Consumer Duty.

Authored by Virginia Montgomery.