The FCA has today told financial services firms to focus on the outcomes of monitoring customers under the Consumer Duty, rather than just their activity.
It said some firms need to do more to make monitoring proactive and outcomes-focused.
Charlotte Clark, director of cross-cutting policy and strategy at the FCA, told firms they have to demonstrate how information drives action and test whether interventions are effective.
Writing on the FCA’s website, she said the Consumer Duty was designed to ensure firms were focused on the outcomes that matter to their customers. “Understanding the actual experiences of people and identifying potential harm are essential to delivering these improvements. So outcomes monitoring is at the heart of helping consumers to better navigate their financial lives.”
She said that understanding the outcomes is about more than collecting data or producing reports. She said the FCA's review found that the strongest approaches were structured, evidence-based and focused on using information to identify risks.
Ms Clark said: “Firms that were most effective did not simply collect management information; they used it to understand what was happening across the customer journey, challenge performance and drive improvements for consumers. They understood that every part of the customer journey gives an important signal.”
She said the strongest firms had clear monitoring frameworks that defined what good outcomes looked like in practice and linked those to different stages of the customer journey.
Rather than relying on broad statements or high-level metrics, she said the strongest firms translated customer outcomes into measurable indicators and regularly reviewed whether they worked. Importantly, the firms could demonstrate a clear link between the information they collected, the decisions they made and the actions they took.
Ms Clark warned that some firms’ monitoring frameworks were not sufficiently focused on customer outcomes or the risks of harm. She said they relied on high-level monitoring without a clear structure for identifying poor outcomes, understanding their causes or taking appropriate action.
She said firms should be able to show a clear link between management information, decision-making and improvements in outcomes. “This includes explaining why metrics and tolerances were chosen and whether actions have been tested and are effective in reducing customer harm or friction.”
Ms Clark said there must be strong board and senior management engagement with the issues. She said: “We still want to see clearer evidence of challenge, discussion and decision-making. Boards and senior leaders should be able to demonstrate how they have scrutinised outcomes, challenged assumptions and driven improvements where needed.“
She added: “As firms continue embedding the Duty, they should consider whether their monitoring gives them a clear enough view of customer outcomes and whether it leads to timely, effective action.”