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The UK’s Financial Services Consumer Panel (FSCP) has called on the Financial Conduct Authority (FCA) to ensure that consumers are better informed about their financial options.
In a new report, the FSCP highlights the need for increased visibility of basic bank accounts (BBAs) and a clearer understanding of non-traditional payment mechanisms.
The research is timely, given that the Consumer Duty has been in effect for just over a year, and the FCA itself recently called on banks, building societies and payment firms operating in the UK to do more to provide access to bank accounts, particularly for those who currently lack one.
Consumer education
The FSCP’s report says improved consumer education is essential to safeguard vulnerable individuals from financial harm: “To make informed decisions about everyday payments and banking, consumers need to be provided with clear information about costs, risks, benefits and protections.”
The panel's findings reveal that although BBAs are designed to support those in financial difficulty, low awareness and poor promotion by banks hinder their accessibility.
Only 13 percent of respondents to the FSCP’s survey use a BBA, despite 25 percent of those without such an account facing challenges that could be alleviated by one.
The report urges the FCA to push banks to promote these accounts to the consumers who need them most, particularly through channels aligned with the new Consumer Duty standards of customer support and understanding.
The FSCP’s research also shows that UK consumers’ use of non-traditional payment methods such as PayPal, mobile payments and open banking is growing.
However, the panel warns of persistent gaps in users’ knowledge of the risks associated with these services and suggests that the FCA take steps to ensure that providers of such payment methods offer clear and comprehensive information.
What are the recommendations?
The FSCP has provided a list of recommendations for firms to consider, including suggesting that providers should ensure that customers understand the costs, risks, protections and redress options associated with their chosen payment methods, in line with the Consumer Duty guidelines.
According to the panel, this would help consumers make safer and more informed decisions when using newer payment mechanisms.
The report suggests that the FCA conduct further research to test whether consumers truly understand these elements, suggesting that a mystery shopping exercise could help assess the quality and usefulness of the information firms provide.
It also recommends that the regulator work with banks in the UK to ensure that BBAs are actively promoted and made accessible to all eligible consumers, particularly those in vulnerable circumstances.
It notes that many consumers who could benefit from BBAs may not be aware of their availability or how they could help in managing their finances.
The panel says banks should use a broader range of communication channels to promote these accounts in a way that meets the diverse needs of consumers, in keeping with the Consumer Duty’s emphasis on customer understanding and support.
“It is important that consumers, particularly those in vulnerable circumstances, are empowered to make informed decisions about basic banking services and payments, which are essential to participating in society,” said panel chair Helen Charlton.
Charlton continued that to deliver good customer outcomes under the Consumer Duty, and reduce the risk of financial exclusion, firms should be “proactive” in promoting services that best meet consumers’ needs.
She added that they should provide clear and timely information to ensure consumers understand the benefits, protections, risks, redress and costs of their payment methods.
“We are pleased to see this reflected in the FCA’s recent report on UK Payment Accounts Access and Closures Update and look forward to engaging with the FCA further on this important topic.”
