The FCA has recently published a Dear CEO letter focusing on payment firms. The letter reiterates the importance of Consumer Duty, which the regulator defines as the “…cornerstone of our three-year strategy”. The letter is intended as a reminder that payment firms are well within the scope of the Duty, and the regulator expects them to place consumers’ interests at the heart of their activities.
While the requirements for payments firms don’t differ from those of other sectors, there are some areas that the regulator will focus on as evidence that the firm is working to deliver positive customer outcomes. We have reviewed the Dear CEO letter and identified three themes that deserve particular attention from those involved in the implementation of the Duty.
A complex chain
Modern payment chains are complex, involving several intermediaries and service providers. Under the Duty, firms will be expected to consider and justify how their actions deliver positive outcomes to customers at the end of the distribution chain. This will require firms to collaborate with each other to exchange information on whether customers are obtaining good outcomes, and whether the products they purchased have met their needs.
Special reference is made in the letter to cross-selling. Firms will need to ensure that when they cross-sell products to new customers, the products are still appropriate to the needs of the new target market.
Clarity and support
A particular focus for payments firms in this area is to ensure they are upfront and clear about the protections afforded to customers who use their services. For example, Payment Institutions (PIs) and Electronic Money Institutions (EMIs) are not able to offer protection under the Financial Services Compensation Scheme, and this should be highlighted to customers before a product is sold.
Another area of emphasis is providing support channels that meet the needs of customers. Many firms in this space may choose to operate entirely online for example. However, they should consider whether this is enough to cover all of their customer’s needs, including non-standard requests. A customer may want to speak to a support agent about a fraud concern, or may momentarily lack access to the internet. Firms should think about how well their support systems can adapt to these situations.
Better handling of fraud
Payment firms are subject to money laundering rules, and as such, they may establish and implement several controls to prevent criminals from using their services. In the letter, the regulator points out that in practice many firms often adopt radical measures, like freezing customer accounts, and they do so for too long and without an appropriate explanation. The expectation under the Duty will be for firms to maintain their anti-money laundering measures while minimising frictions for customers and allowing them to keep benefitting from the product they purchased.
In order to show they are acting in the interest of the customer, firms should consider how to make the freezing of accounts less frequent and protracted as well as better communicated and supported.
How Delta Capita can help
Delta Capita’s UK Consumer Duty team comprises senior industry practitioners and former C-suite banking executives, with specific expertise in the payments sector.
Whether you need help to assess your Consumer Duty readiness, benchmark against industry best-practice or accelerate delivery across various workstreams, our team can help you as we are helping other organisations with similar challenges.
To find out more about how we can support you, contact us and speak directly to one of our experts.
