Treating customers fairly (TCF) is high on the FCA's agenda so embedding TCF into the customer's digital journey is fundamental.

The government, the FCA and other regulators recognise the benefits of digitalisation. In its 2016/17 Business Plan, the FCA identified the impact of technology as one of its priorities for the coming year.

However, technology also creates risks of financial exclusion or poor customer outcomes for some consumers. Although many consumers favour digital channels, the traditional approach remains a key draw for others. The FCA identified in its discussion paper (DP16/1) that this is particularly apparent amongst the ageing population. Changing demographics and trends in health and society mean that developing more inclusive financial products and services is increasingly important.

With TCF so high on the FCA's agenda, financial institutions must ensure they strike the balance between technically-able consumers and loyal customers who prefer a more traditional approach, taking care not to exclude vulnerable customers.

Who is a `vulnerable customer'?

"A vulnerable customer is someone, who due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care." - FCA Occasional Paper 8 (February 2015)

The European Commission's new definition of vulnerability (published in its paper, `Consumer vulnerability across key markets in the European Union') expands on this by explaining that a customer could be vulnerable in one situation but not in others.

Financial institutions should seek sufficient information to decide whether a customer may be vulnerable.

Although it is important to capture all the necessary information from the customer, there is a challenge in how much information can be captured electronically, without a member of staff being able to speak to the customer directly and ask questions about their financial or personal situation. There is a reliance on customers to come forward to explain their financial or personal circumstances so that the appropriate product and next steps can be identified.

We set out below some practical steps financial institutions can take to ensure TCF is embedded into the customer's digital journey.

  1. Make your digital journey user-friendly - is your customer journey accessible to a wide range of consumers? Consider increasing font size and presenting key information in videos or infographics where legislation allows.
  2. Offer alternatives for the less tech-savvy - the FCA has emphasised that it expects firms to offer suitable alternative channels or choices in order to treat customers fairly. This includes allowing and facilitating non-digital access where this would not incur undue costs. Consider providing simple instructions for online services or offering video or in-branch demonstrations. Clearly display a contact telephone number for customers who may prefer not to use a digital method.
  3. State clearly that your customer is applying for a financial product - at execution or confirmation stage, clearly communicate to the customer that this is the point of purchase for a financial product. Give your customer the opportunity to ask questions about the product or agreement before entering into it. Providing different methods of contact, such as telephone and live chat, can help avoid excluding any consumer group.
  4. Give your customers time to understand key documents - design your digital journey to allow customers enough time to read information provided to them online. Consider offering to send key documents by post or allowing customers to print and save documents. You may wish to offer a follow-up call or email alerts.
  5. Mitigate legal challenges to digital consent - there is a grey area around the form of consent required by s176A Consumer Credit Act 1974 and what is meant by "given" where documents are to be transmitted digitally. Difficulties may arise if a firm sends a document via an online portal but the customer does not log on to read it so consider sending key documents by post. Consent to send documents electronically can be obtained at the application stage, at a further stage in the life-cycle of a product or if the customer signs up for an online account.

FCA review of CCA regime

There are legal challenges in relation to digitalisation where the law has not caught up with technology. There is arguably a need to `future proof' the consumer credit regime to keep up with innovation. The FCA is required to undertake a review of the CCA and to report to HM Treasury by 1 April 2019. The key aims of the review include modernising the CCA regime and striking the right balance between high standards of conduct and innovation.

  1. Ensure each page in your sign-up process is standalone compliant - key features and requirements must be clear and risks and regulatory information should not be buried. Consider the FCA's guidance `FG15/4: Social media and customer communications' when planning financial promotions and communications.
  2. Slow down - the FCA has expressed concern in the past that in some markets the online application process was presented as easy and `hassle free'. The speed or ease of transacting digitally could also downplay the importance of the financial transaction. This has the potential to lead to poor customer outcomes. For example, customers may be accepted for products that are not right for them or may carry out transactions that they cannot afford. You should ensure that the digital process fully complies with applicable legal and regulatory requirements. Present information in a way that addresses any behavioural biases and enables the customer to make an informed decision.
  3. Connect your customers to the right product for them - have you presented the key information about the product in a way which is clear and easy to understand and that enables customers to compare the product to other products offered by you or other providers? A comparison table can help the customer choose which of your products or services is right for them. If a product is not suitable for a customer then it may be appropriate to direct them to an alternative that better meets their needs.
  4. Consider using the regulatory sandbox - the FCA's recently introduced regulatory sandbox offers financial institutions a safe environment in which to test innovative ideas, reducing regulatory burden and helping to achieve greater compliance.