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Yvette Wise

Christmas may well have come early in the FCA’s Consumer Duty feedback and consultation paper with more meaningful proposals for firms in the pursuit of delivering benefits for consumers. There’s not much detail in the underpinning cost/benefit analysis, but with only a nine-month implementation timescale, the New Year may well bring a costly hangover if firms aren’t preparing now.

We’re faced with an increasingly complex and fast-moving landscape in which consumers are making more financial decisions. The Financial Conduct Authority’s (FCA) intent with the Consumer Duty is “to drive a healthy and successful financial services system, in which firms can thrive and consumers can make informed choices about financial products and services”. This is great news – a clear opportunity to improve poor levels* of consumer trust with a monumental shift in embedding the right culture and behaviours across the entire customer journey and within each of its relevant parts.

As we head fast and curious into the next stage of the Consumer Duty consultation, many questions remain unanswered, but the direction is clear: making it easy for consumers to make informed, timely decisions on products that are appropriate for their needs, and improving support services to bring a fairer, more consumer focused level playing field is the way forward.

At this stage all firms have until 30 April 2023 to fully implement the Consumer Duty.

Why now?

Regulation has evolved over time, as we see below, and the FCA has recognised that many organisations are already delivering the right outcomes for consumers.

It also continues to identify consistent ongoing customer harm with some organisations interpreting or applying simple processes to retrospectively rationalise decisions made. Treating Customers Fairly (TCF) has not shifted the DNA, or the culture of organisations, enough to prevent:

  • sending information to customers that is either confusing or misleading
  • providing products or services that are not fit for purpose
  • providing poor customer service which hinders the customers’ ability to act
  • exploiting customer inertia, behavioural biases and/or vulnerabilities.


What is Consumer Duty?

Consumer Duty is a significant change and a new generation in regulation that is comprised of a package of measures based on the consumer principle that a firm must act to deliver good outcomes for retail customers:

Consultation remains in flight with the FCA seeking further views ahead of 15 February 2022. In summary:

  • The FCA no longer proposes, for now, the introduction of a private right of action (PROA) against breaches of the consumer principle, recognising industry concerns about the potential impact and unintended consequences.
  • It proposes to align the scope of the Consumer Duty with the existing scope of its sectoral sourcebooks. For example, for mortgages the Consumer Duty would follow the position in the Mortgage Conduct Business Sourcebook (MCOB).
  • It does not propose making all firms in the distribution chain responsible for consumer outcomes on a joint and several basis. It would only expect firms to be liable for their own activities.
  • Firms would not be able to transfer their responsibilities to other firms. Where firms work together to manufacture a product or service, the FCA proposes that they must have an appropriate written agreement setting out their mutual responsibilities.


However, the FCA proposes that the Consumer Duty would apply to firms (including wholesale firms) that have a material influence over:

  • the design or operation of retail products or services, including their price and value
  • the distribution of retail products or services
  • preparing and approving communications that are to be issued to retail clients or
  • direct contact with retail clients on behalf of another firm, such as firms involved in debt collection or mortgage administration.


Could the Consumer Duty be improved?

Organisations have made a monumental difference to the financial wellbeing of their customers during these Covid-19 times, and while it’s encouraging to see the FCA recognising those standards, the impact of Consumer Duty may not be as celebrated as its intent because of potential issues in the formulation and implementation.

The FCA proposes a short implementation timescale of nine months from the point that the consumer principle and new rules and guidance are made, relying on this consultation providing enough clarity to allow firms to make a start. Also, the underpinning cost/benefit analysis doesn’t provide much clarity, with the FCA stating it has “not been possible to reasonably estimate the scale of benefits due to the broad and pre-emptive nature of our proposals”.

Further clarity would help to avoid consequences such as financial exclusion or communication fatigue as firms attempt to take account of every possible issue for every customer and potentially create confusion with lengthy communications. Organisations need to beware of the risk of over-engineering when interpreting the FCA proposals.

What can you do now?

Implementing Consumer Duty will require more than a simple process change. Drawing up plans, putting in new technology, listing required behaviours – these steps alone will not be enough. Change is a people issue, not a process issue, and that means going to the very core of organisational culture.

The good news is that there are actions you can take now that will make a significant difference down the line in creating a climate in which the right behaviours can thrive.

Start by truly recognising where you are now with a cultural snapshot: There are three key questions you should be asking:

  • Does your organisation know what it stands for? Do your people have clarity about its culture and ethos? Could they summarise it succinctly?
  • Do you have a set of agreed visible, demonstrable actions (VDAs) that leaders carry out to demonstrate commitment to people and customer? Could your people cite any examples? Is the leadership team a good role model?
  • Does your organisation have a permission culture? Are employees empowered to do the right thing, or are they hamstrung by bureaucracy and a culture that does not encourage this?


The next step is to fully embrace the opportunity to re-set and launch the next generation of your customer experience, using technology to amplify and personalise. Innovation has outpaced evolution and anthropological studies show that we can only really maintain stable relationships within groups of 150 people – but most organisations require their people to collaborate in vast global teams. Craft and share the right story; one that creates a clear and compelling sense of purpose for your organisation. Once done, make simply brilliant noise to engage your people; bringing those principles to everyday life is vital if you are to avoid half-truths and rumours taking hold.

Map your customer journey and join the dots by connecting people with technology. With many digital transformations already underway this is an ideal opportunity to understand your operational readiness ahead of implementation – what can you change today that will make a difference to tomorrow? Use data driven analytics to understand customer behaviours; address bias in your product design and automation; knock down barriers and disjointed processes online and offline that cause customer friction; and drive higher employee engagement to ensure your customer journeys are fit for purpose and ready to engage with the new regulations.

Start the right conversations and measuring now so you engage hearts, minds and measures as one. Your business intelligence systems will tell you how you’re performing against key metrics that are relevant to Consumer Duty and if you are going to meet the needs of the new rules on an ongoing basis.

There’s no changing the fact that customer expectations are rapidly changing and the regulatory revolution is coming, but those organisations that embrace the change and act in the best interests of their customers are the ones that will win out.

Discover more at Retail banking

Written by

Al Murray

Yvette Wise

Retail Banking Lead

A twenty-year track record in senior positions and a depth of transformational change experience in within Financial Services. Yvette has led some of our most significant partnerships with clients, winning fourteen industry awards in the past five years. A hands-on operation consultant and a regular CX transformation key-note speaker, with a broad industry perspective and a depth of operational experience that underpins many of Capita’s strategic client solutions.

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