How should payment firms react to the FCA "Dear CEO" letter on Consumer Duty?

The key messages from this were that those firms authorised and registered under the Payment Services Regulations, Electronic Money Regulations and those registered as Account Information Service Providers need to ensure that:

• Products and services meet the needs of an identified target market, including vulnerable customers;
• Products and services provide should be priced correctly and provide value to customers;
• Communications should support consumers to make informed decisions; and
• Consumers should be supported throughout the product and service lifecycle.

In addition to the specific Consumer Duty outcomes, the FCA also calls out the payments sector for poor practices in relation to financial crime controls, excessive use of account freezing, lack of customer support when reporting fraud – especially for Authorised Push Payments- and the need for strong customer authentication.

In our experience, Payment firms face some unique challenges in implementing consumer duty. Completing the required review and changes within the prescribed timeframe requires early and careful planning, particularly relating to product review and enhancements to systems and data. Firms need to act now to:

• Embed the substantive elements of the Consumer Duty and ensure that products/services, communications and customer journeys meet the required standards;
• Make sure they are ready to meet the end April 2023 deadline for manufacturers and distributors to be sharing information about products and services;
• Leverage the strong linkage amongst financial crime (notably fraud) and Consumer Duty controls, and work to ensure internal teams are aligned on control overlaps and gaps; and
• Ensure second line testing and audit functions are up to date with the requirements and will be equipped to review implementation effectiveness post the deadline.

With the implementation deadline quickly approaching, now is the time for firms to ensure they have arrangements in place for effectively embedding the Consumer Duty. The FCA will be closely tracking the industry’s approach to implementation, and firms should be proactive in their approach and posture towards the new standards.

Please reach out to our Payments specialists, Christine Reisman, Bernadine Reese or Stuart O’Sullivan if you would like to discuss your approach to implementing the #consumerduty and how we can help tailor your response to your Payments business.