Welcome to the trust reset
In financial services, trust is no longer claimed. It's earned, evidenced, and audited, and this quarter brings three major tests: Consumer Duty turns three, the EU AI Act's high-risk rules take effect, and SDR's marketing rules mark their second anniversary.
Welcome to Q3’s edition: The Trust Reset.
Q3 is a busy quarter for the financial services sector for a few key reasons:
The FCA’s Consumer Duty turns three at the end of July
The EU AI Act has more rules kicking in
Key parts of the UK’s Sustainability Disclosure Requirements (SDR) are two years old
In financial services, now, more than ever, trust is earned, evidenced, and audited. No longer is trust simply claimed.
Here’s what’s coming up in Q3.
Consumer Duty, three years in
2026 is a big year for Consumer Duty. In year one, firms were getting to grips with their new obligations. Year two was about getting familiar with new reporting requirements. Year three is likely to mark the end of any excuses.
In its reflection on year two of Consumer Duty, the FCA compared year one reports with the latest batch. There are some clear themes.
On the positive side
The FCA reported seeing “a meaningful shift in how governing bodies approach the Duty.” This means boards are engaging with the reporting process, and crucially, many firms have opted to retain their Consumer Duty Board Champion, despite this being optional.
Likewise, the FCA highlighted clear evidence that firms are “increasingly setting out comprehensive action plans”. The action plans, it would seem, are being tracked and given timelines.
Another improvement on year one is firms’ use of data. “Firms are drawing on a wider range of quantitative and qualitative data to demonstrate customer outcomes.”
Room for improvement
Despite the positives, the FCA summary of year two board reports is clear: there is room for improvement.
Firstly, data noise appears to be a key issue. “Some firms presented extensive data without sufficiently explaining how it demonstrated good or poor outcomes.” This is a clear indication that the FCA isn’t looking just for raw data; it’s looking for conclusions.
This means firms need to refine data capture. Data need to be reviewed, summarised, and have outcomes extracted.
The distribution chain is another key theme. The products and services firms deliver are frequently reliant on long distribution chains. The scope of Consumer Duty touches on the entire chain, and the FCA wants to see better analysis of the upstream and downstream chains as they move toward the consumer.
The FCA has implored boards to challenge reports. This speaks to the data overload point above; it’s no good to produce the data if it’s not challenged appropriately.
Finally, whilst analysis of products, services, and value is strong, the FCA has highlighted that firms appear to be focusing more on these “than on customer understanding and support.”
The EU AI Act
On 2nd August, the latest update to the EU AI Act comes into force, and for financial services firms, it's a big one.
The EU AI Act classifies systems by risk level, and this August, high-risk AI system rules become fully enforceable. For financial services firms, this means high-risk use of AI in areas such as credit scoring, creditworthiness assessment of individuals, or life and health insurance risk assessment and pricing. Firms will be compelled to follow the EU AI Act to ensure compliant use of AI systems in areas deemed high risk.
In practice, that means putting a risk management system in place, ensuring solid data governance, maintaining technical documentation, and building human oversight into how these systems operate, plus passing a conformity assessment before deployment.
Transparency obligations also come into force alongside this. Any AI system that interacts directly with customers, such as a chatbot or virtual assistant, must make clear that customers are dealing with AI rather than a human.
There's some flexibility for systems already in use: the new obligations apply most immediately to new deployments or existing systems that undergo significant changes after 2 August. Firms should also note that AI embedded in products already governed by other EU safety legislation won't fall under these particular rules until August 2027, so the rollout is phased rather than immediate.
For firms in scope, the priority now is identifying which AI systems fall into the high-risk categories and making sure governance, documentation, and oversight processes are in place ahead of enforcement.
SDR marketing rules
On 31 July, the naming and marketing rules and investment labels at the heart of the UK's Sustainability Disclosure Requirements (SDR) regime turn two.
SDR is the regime launched by the FCA to tackle so-called ‘greenwashing’ and help consumers navigate the market for sustainable investment products.
Two years on, elements of SDR are now well established. This includes the anti-greenwashing rule that requires all sustainability-related claims to be fair, clear and not misleading.
Likewise, naming and marketing rules apply, restricting the use of terms like "sustainable," "sustainability," and "impact" to products that meet requirements.
The second anniversary is a useful review trigger for firms; checking marketing materials, fund names, and disclosures to make sure they continue to hold up against ever-evolving FCA guidance.
The Trust Reset Edition
This quarter, across the website and our podcast, Fin the Week, we’ll be diving deep into how trust is earned and evidenced in financial services.
We’re kicking off the quarter with a four-part teardown series that looks at the impact of Consumer Duty at the three-year point. Each week, we’ll be taking you through a review of user experience and digital journeys across four areas of finance: retail banking, investment platforms, mortgages, and protection insurance.
Later in the quarter, we’ll be taking a closer look at what high-risk means as part of the EU AI Act. We’ll also be looking at whether ‘greenwashing’ has been eradicated.
