Bank Switching: Consumer Duty Teardown #1

Episode transcript

Paul Wood  (00:16)

Hi there, I'm Paul.

Pat  (00:17)

I'm Pat.

Russ  (00:17)

I'm Russ.

Paul Wood  (00:18)

And this is Fin the Week. You'll notice we're without Amelia this week — she's on holiday, so I'm picking up hosting duties. Hopefully I don't mess it up too much and can keep the conversation going. We'll see how it goes. How's everybody doing? Another heatwave at the moment.

Russ  (00:35)

Yeah, it's warm — and it's not easy having a six-week-old in this heat. Well, six weeks, four and a half really.

Paul Wood  (00:41)

Yeah, feels like six.

Russ  (00:46)

It does.

Pat  (00:48)

I've just been in the sea, so I'm nice and chilly.

Paul Wood  (00:51)

So last week we kicked off the Consumer Duty Anniversary Month. We talked a bit about what Consumer Duty is and teased a four-part series of teardowns. Today is our first teardown episode, where we're looking at retail current accounts. We've taken three UK banks — we won't be naming them, we'll refer to them as Bank A, B and C, and I'll explain more about that in a minute. We've looked at the switching process and the onboarding flows and tried to analyse how well they're doing against Consumer Duty outcomes.

A bit on why we went with current accounts first: it's one of the most-used financial services products in the country, arguably the most-used. Most people in society will have a bank account, and many will have switched providers at some point. So it's a good one to look at.

But before we get into that, Russ — we were chatting earlier and you mentioned it'd be good to talk about Enforcement Watch 2, which the FCA just published. It's quite timely, so it'd be good to hear about that.

Russ  (02:10)

Yeah, I spotted it yesterday — it was actually released a couple of days ago. I think it's timely because they mention they're three years in now, and this newsletter outlines the kind of action they've been taking, and how they're moving from supervision to enforcement.

It's interesting to see what the investigations are actually looking at. I went through the list to see if anything was specifically relevant to user experience, because we know Consumer Duty covers all channels, all communications and all consumer journeys, whether digital or not.

In summary: there are 11 open investigations. In terms of actual enforcement, five firms were hit with something called a voluntary requirement they needed to sign, which can mean different things. For example, some firms — if they haven't conformed to Consumer Duty — have been required not to accept new business, or not to run certain promotions, until those issues are resolved.

There isn't a fine yet, which is interesting, but it'll be worth watching how these investigations play out. One example: a fund manager who was unable to show it was delivering fair value to consumers or monitoring consumer outcomes, so they've had to sign something to cease part of their activity.

Another was a wealth management firm — the FCA weren't convinced they'd appropriately considered its influence on retail outcomes, particularly for vulnerable clients. They haven't given the specifics, but you could read into it that there are probably accessibility or communication improvements needed.

Interesting that both of those are about not being able to show outcomes. The most interesting one from a digital perspective is a CFD trading platform — the software was giving a false sense of possible returns. I thought that was really interesting, because they were failing to act in good faith by seeking to manipulate customers to create demand.

That's a trading platform rather than a bank, so it might be more relevant to the investment podcast. But it shows how important it is, from a UX perspective, that it's the duty of these platforms to give users the ability to make informed decisions — and the duty of the firm to make sure returns are shown clearly. Without knowing the specifics of how it gave a false sense of possible returns, I'd imagine either the numbers were wrong or the interface was designed in a way that made it hard to understand. That software example really stood out.

They said last financial year they interviewed several firms, and there are 11 open investigations now. It's good timing, and good to see a digital example in there. It'll be really interesting to see how these are closed — whether the firms that signed VREQs can resume activity, because they've actually had to pause what they're doing. So the FCA are actively enforcing this now.

Paul Wood  (06:27)

Yeah, and this ties into what we discussed last week — Consumer Duty is approaching its three-year anniversary, and the tone from the FCA has been very much "now it gets serious." The first two years were about firms finding their way, and this backs that up. It shows they're taking real steps to stop firms doing business until they resolve these issues. That's a serious step — not quite a fine, but as good as, in many ways.

So, should we move on to our first teardown? We've spoken a bit about it — it's the bank switching journey. Russ, to kick us off, did you want to talk about the types of firms we're looking at? We're calling them Bank A, B and C, but what do they represent — they're three types of bank, aren't they?

Russ  (07:29)

Yeah, we picked three different sizes of firm: a large high street bank — no names — a mid-tier bank, and a challenger bank.

It's interesting to compare the three, because we've discussed recently how some of the more established banks are probably less able to modernise their systems because of legacy platforms. So it was interesting to compare a challenger bank to a mid-tier bank and a larger, established high street bank. Those are the three.

Paul Wood  (08:14)

Yeah — and I think it's an interesting area to look at. For context: in 2013 the Current Account Switch Service launched, guaranteeing a seven-day switch with refund protection, and it's estimated that around one to 1.2 million switches happen per year. So this is a big deal, and banks commonly compete for attention in this space.

On methodology — we mentioned this last week, but it's worth repeating — we've primarily used a tool called UX Duty, which is a tool we built and run to understand user journeys. Russ, what's the process been? You feed user journeys into the tool, and it gives us data on how those journeys are performing?

Russ  (09:06)

Yeah — there are a couple of ways it works, but for these studies you manually input the URLs you want UX Duty to check, and it builds a journey. For this one we looked at seven or eight pages as part of the switching journey — everything from the product page to the terms, and as many steps of the actual application form as we could get through. Because it's a scanning engine, it can't complete forms and move to the next step itself, so it's a bit limited there. But it checks against the PRIN rulebook, checks various elements on the page, and runs an accessibility scan against the web accessibility guidelines.

Paul Wood  (10:08)

And on the process — these findings are relevant to Consumer Duty, but having looked through them myself, they're also just relevant to good user experience generally. We said last time that Consumer Duty requirements are really just requirements of good business. So a lot of what we talk about today will probably follow those lines — is that fair to say?

Russ  (10:36)

Yeah — actually the Enforcement Watch 2 publication summarised it quite well. It said there are two things firms should ask themselves: am I treating my customers as I would expect to be treated, and are my customers getting the expected outcomes from my products and services?

It's a bit of an old cliché, isn't it — treat others as you'd like to be treated yourself. That's basically what they're saying. It's just best practice — it's about trust, honesty and credibility for these firms.

Paul Wood  (11:18)

Yeah, absolutely. So, moving on to the findings — I've got the front page of the main findings in front of me. Overall, across the three banking brands we reviewed, there are 205 findings against the Consumer Duty outcomes. It's obviously not feasible for us to run through all of those, but — were you surprised by the overall level of findings?

Russ  (11:50)

Once you put accessibility checks in the mix, no. We discussed last week that WebAIM reports 95–96% of homepages have accessibility issues, and usually more than one — because when you look at the underlying code, things often get missed. It might not be at the point the site was built; it might be that someone managing the content hasn't added alt tags for images. If someone's on low bandwidth and the image doesn't load, they won't know what it is — or, more commonly, it matters for screen readers. Sites can quite easily evolve over time and become inaccessible, so it picks up on all these things.

It wasn't a huge surprise, but 40% of the findings were failures against WCAG success criteria. So it was roughly as expected, though there was more than I'd have guessed.

Paul Wood  (12:59)

Yeah — that's the Web Content Accessibility Guidelines, which public sector sites, for instance, have to comply with.

Russ  (13:03)

Yep — and it's also the recommended standard from the FCA.

Paul Wood  (13:14)

Staying on the summary for a moment — it's broken down by the Consumer Duty outcomes: products and services, price and value, consumer understanding, and consumer support. The consumer support column has the highest number of findings against it. Is that because that's where most of the accessibility issues sit?

Russ  (13:47)

Yeah, 100%. There are a lot of accessibility issues there, but it also takes into account complaints links and complaints pathways. There were quite a few issues with not clearly showing how to make a complaint along the journey — though that one's a bit more nuanced, because it's checking for a complaints link, and you could argue the rulebook says it needs to be present across the product lifecycle. At an early stage you could argue a customer isn't really "in" the product lifecycle yet, since they haven't purchased it. It's a bit vague on whether that applies from step one.

But a consumer might see the product, then have an issue with it and want to complain immediately. A bit more relevant, and probably more at risk under Consumer Duty, is debt advice signposting — that comes under consumer support. It's important, and firms have an obligation: if you're selling an attractive overdraft or loan deal and the APR is hidden away, that's a big issue. And if you don't have financial advice or debt advice signposted, that's an issue too. That's why complaints and debt advice come up repeatedly through the journey — the debt advice one especially gets flagged a lot.

Paul Wood  (15:34)

Yeah. Before we dive into specific findings — looking at the total findings across the three brands, Bank A, our large high street brand, only accounts for about 25% of the findings flagged. The rest are shared between the two smaller brands. I don't know exactly what that tells us, but it's interesting — maybe it says the larger the brand, the more resources available to tackle common issues.

Russ  (16:16)

Perhaps more extensive reviews too, yeah.

Paul Wood  (16:19)

Yeah. Should we get into the key findings? Let's start with where the picture is mixed. We touched on this briefly last week — the idea of a "loud offer, quiet conditions." Nice way to put it, and it came up for a couple of the brands. What did that involve?

Russ  (16:46)

It's when you've got a big, shiny offer, but the criteria for it are buried down the page in small text. Bank A, for example — which had fewer findings overall — had a high-severity issue where it was offering Premier Banking, but the threshold was something like £75,000 of income or £100,000 of savings.

Looking at the rulebook, without getting too technical, there are a couple of rules the firm probably isn't meeting: one on the target market, where you need to specify, at a sufficiently granular level, who the product is for; and another that says you need to ensure the product provides fair value. You could argue, more on the first point, that hiding that information and making it hard to find isn't good for user experience or consumer outcomes.

The Premier Banking example probably isn't the best illustration though. It's more relevant when — since we're talking about bank switching — you could be switching in for Premier Banking, but switching from a classic £600 switching offer. The criteria for that were buried in small grey text: you needed to make two deposits within a certain timeframe, and the combined deposits needed to total around £4,000.

Going back to those two questions the FCA said firms should ask — the second one, are my customers getting the expected outcomes — there's definitely an argument that some aren't, because the information is hard to find. The reason for how you get the £600 offer should be closer to the offer itself, and clear. Instead it's a small bullet point in grey text at the bottom of the page, and UX Duty picks up on that and connects the dots: there's a big offer at the top, and further down, in small text, it turns out not everyone can actually get it. Some people probably switch without realising how the offer actually works.

If that pattern were consistent across a number of offers on the site, I don't think the FCA are enforcing on minor things like this yet, but if it were a clear trend, I'd expect them to eventually step in and say consumers are signing up without really understanding the terms.

Paul Wood  (20:19)

That reminds me — have either of you ever switched your primary current account provider? I haven't, and I've always seen those adverts about the switch service being quick and easy — "Bank A is offering £200 when you switch," that sort of thing. I've always assumed that sounds too good to be true, and there's almost certainly a catch. You could argue that's damaging to the industry overall, because my own instinct now is that's just how banks operate — shiny deals with a catch behind them.

If the messaging were clearer — something like "transfer your savings of X to us and we'll give you Y" — that would be a fairer message, and it'd make people like me less cynical about it. Have either of you toyed with switching, and what drove it?

Pat  (21:37)

I have. I didn't really trust the automated switching mechanism, so I did it manually — moved all my direct debits over myself and made sure everything was done properly. I didn't go for one of the switching deals though; I moved to Revolut, because the experience of using Revolut is just so much better than the main high street banks. Revolut's my main bank account now.

I did have one issue, with the refer-a-friend offer. I referred my wife to Revolut and was meant to earn £50 once she signed up and put some funds in. We followed all the rules — there was a checker in the app — but when we finished the last step and she'd put funds in, nothing happened. No indication the offer had completed, no £50 in my account. I had to raise a ticket with Revolut support and escalate it manually, and eventually they paid out. But it definitely cast doubt on the quality of the offer, and made me wonder whether they only action it if someone actually complains.

It's only £50 — a lot to some people, not much to others — and a fair proportion of people would probably just forget about it or not bother chasing it.

Paul Wood  (22:50)

Yeah, I think that's the issue with how these schemes are worded. When you read the small print, it feels like there's a very specific checklist you need to complete, and human nature is to assume "maybe I didn't qualify" and just drop it.

Pat  (23:15)

Yeah — you'll probably find, deep in the small print, a line that says once you've completed the requirements, raise a support ticket and they'll credit you. But that's never explained clearly, so you end up having to chase it yourself and hope they honour it.

Paul Wood  (23:37)

Back to the report findings — two of the three brands suffered from this category of issue. In the mid-tier case it was to do with a loan percentage, is that right?

Russ  (23:54)

Yeah, that's about it.

Paul Wood  (23:56)

Moving on to an area where all three brands fell short: no visible complaints route, and no independent debt advice signposting. Common theme?

Russ  (24:16)

Yeah — there are around 200 findings in this category, and I haven't got the exact breakdown to hand, but I remember one specifically. It's slightly separate from bank switching — it's about the loan or overdraft pages. When loan information is presented, that's often an indication the person reading it is potentially vulnerable, because they're in financial distress, and there should be debt advice signposting on or near that information. If there's a whole row on the page about it, there should really be a link. On these sites, that information often looks like it's there just as a checkbox exercise — not really looking out for the consumer in the way it should when they're in financial distress, which is the firm's obligation.

There was one instance where it was hidden away in an accordion, without a proper label — which is close to manipulation of the interface. That's against the rule requiring firms to meet the needs of retail customers, including those with characteristics of vulnerability, under the consumer support outcome. A lot falls into that category — debt advice signposting, and the whole accessibility side too — so you see a lot of findings land there.

Paul Wood  (26:38)

Something else that stood out to me: one banking brand explains in detail how to switch into their brand, but there's no mention of switching out. On one hand, fair enough — why would they advertise how to leave? But from the customer's perspective, that's clearly relevant information, and arguably every brand should provide some route for explaining how to leave. Did that stand out to you in the report?

Russ  (27:25)

Yeah, I've seen that mentioned a few times — it should be as easy to leave as it is to join. We talk about friction and sludge, and you definitely see more of it when people try to leave or cancel. I'm sure we've all experienced that.

What UX Duty is doing is essentially automating that kind of manual review. Another thing we can do with the tool — not trying to make this a sales pitch — is integrate analytics. If we had access to something like Firebase or Google Analytics, we could hook it up to UX Duty and map these journeys out in more detail. We're also looking at handling gated content and forms, to build a fuller picture of where the user experience issues actually are, alongside the qualitative signals the scanning engine picks up. There's a lot more we can do with it, and it's interesting it's found this much from just a handful of pages — if we ran it across, say, a hundred pages, we could sort the findings by outcome too, and give firms a clear roadmap of what to fix.

Paul Wood  (29:06)

Did anything stand out specifically around vulnerable customers? Coming back to the enticing-offer examples — do the pages account for customers who might need a different journey because they're vulnerable? Anything stand out there?

Russ  (29:29)

The accessibility findings account for a lot of it. The FCA's view of vulnerability includes things like illness or bereavement — often when people look for financial support and advice — right through to low literacy or low confidence. All of that needs catering for. And everything we talked about with debt advice, making it as easy to close an account as to open one, applies here too.

There's also the type of communications people receive, which is perhaps more offline — we haven't really covered that, and the tool doesn't check it either — but it matters. And then the accessibility guidelines again, which are a recurring theme throughout, and I think we've touched on most of the vulnerability-related findings already.

Looking at the investigations too — the CFD example I mentioned earlier — I could see accessibility being clamped down on next. It's not difficult for a firm to run an accessibility check on its site; there are free browser plugins that flag colour contrast failures or missing heading hierarchy that screen readers rely on. I don't understand why firms don't focus on fixing these. If it's a common trend affecting customers with access needs, it'd be good to see the FCA move in on it — because if the FCA does focus specifically on digital accessibility, that's going to be huge, since so many firms would have to update their systems. It's an area that's largely ignored despite not being difficult to fix, so hopefully this pushes accessible design in financial services further up the agenda.

Paul Wood  (31:53)

Yeah, and it contextualises what accessibility guidelines are fundamentally about — making things possible to understand — and Consumer Duty is trying to measure that too. Any other key findings, on use of language, say? We have a segment called Jargon Busters because there's so much jargon in the industry — did the report flag issues with language, or overly complex terms and conditions?

Russ  (32:43)

It was a common theme — I don't know where to begin, from things like CCA and APR upward. If you asked a hundred people on the street what APR actually meant in relation to taking out a loan, I think you'd get some interesting answers. The list goes on, and often these terms just aren't explained — both on the promotional page and in the actual terms. You could see the FCA stepping in on this eventually, though they wouldn't have the manpower to intervene on every case.

If it's a common issue, and customers are complaining or losing money because it's unclear from the start of the process to the point they leave, I think it does eventually become something worth asking the FCA about directly. It'd be great to get someone from the FCA on the podcast, actually — to ask at what point repeated poor consumer understanding on a digital channel becomes something they'd intervene on. Some of this is quite minor individually, but it's happening across all the firms — at what point does that add up to a Consumer Duty issue?

Pat  (34:29)

Interesting question. Car loans are already in a lot of trouble over commission payments woven into the deals. I bought a car a couple of years ago, and while I didn't end up taking a loan, I looked into it — the dealer's loans were around 12–13% APR, whereas it's pretty straightforward to go to your own high street bank and get a loan at five to seven percent. Over four years, that's hundreds, maybe thousands of pounds difference.

Do you think the FCA would go as far as cracking down on how dealers sell these loans? I think the reason the rates are so high is that people are excited about the car and don't realise they can get a loan elsewhere. The dealer's headline is always something like "this car from £300 a month" — that's the hook. Before the customer's even walked onto the forecourt, they're thinking "I can afford £300 a month, what can I get for that?" So there's never really a moment where they question whether they could get the same car for £250 a month through their own bank.

Paul Wood  (36:02)

Yeah, I think that's the heart of what Consumer Duty is trying to address — making sure a consumer knows where to go, understands what they're signing up for, and can compare options. In your example, a car dealer flashing a monthly figure makes it hard to compare against an alternative, which historically has been the case — it's hard to unpack a car finance deal and set it alongside a standard loan.

Consumer Duty is really an attempt, across the board, to make things easier to compare. And it ties back to bank switching too — if there's an enticing offer, you need all the facts up front to judge whether switching is the right move, and to the right bank. Deals are enticing partly because people don't switch banks often, and once they do, they tend to buy further products from that bank — so it matters that all the information is up front.

Pat  (37:31)

It's a bit like the supermarket traffic-light system — high in sugar, low in fat, whatever. You almost need something like that for financial products, so that when a dealer shows you a loan agreement, there's a big red mark on it saying "this is expensive compared to the rest of the market." People need to know that, and they don't, because the products are too complicated for most people to understand.

Like you said, Russ — ask ten people on the street to explain APR, and maybe two or three could, and most of those would probably be over fifty, because they've been caught out by high APRs before. I couldn't have explained APR until I was in my forties, and I've wasted thousands on loans over the years as a result.

Russ  (38:28)

I wonder how often that happens — like your Revolut example, where you only got the £50 because you complained. The Enforcement Watch 2 piece actually linked to an article from last year: the FCA found some insurers had short-changed customers on the value they received when their vehicles were stolen or written off. The insurers have since changed their settlement practices, and about a quarter of a million motorists are expected to receive around £200 million in compensation for historic underpaid claims. It doesn't say how far back that goes, but it makes you wonder whether firms are at risk of the same thing happening with bank switching offers everyone's eligible for but hasn't claimed.

Pat  (39:33)

Yeah — if they made a commitment and didn't fulfil it, at some point they'll probably have to make good on it. That's happening now with the car finance commission scandal — dealers folding commission into loan deals and pushing up customers' monthly payments unnecessarily. It plays on the exact thing I described before: customers not understanding the difference between a 5% deal and a 12% deal, and just seeing "X pounds a month, that's what I can afford, and that gets me the car."

Russ  (40:21)

Yeah — I was reading that same article and might share it on LinkedIn. The FCA will step in when consumers aren't getting fair value, clearly. It feels like, moving into year three, cases like this are a bit of a warning shot before enforcement ramps up more broadly — including, potentially, around bank switching.

Paul Wood  (41:13)

Should we wrap up the findings from this first teardown? My reading is that all three firms were classified as "high risk" under our Consumer Duty rating system — they all have issues that should, strictly speaking, be addressed. Most of those fall into accessibility challenges, which matters because the more accessible a system, the more people can use it, and that's good for Consumer Duty outcomes generally.

The other big finding for me was unclear terms sitting behind an enticing offer — that feels like a significant issue for the industry. Did anything else stand out, or is that the main takeaway?

Russ  (42:13)

I'd say it's people in financial difficulty, or otherwise vulnerable, being underserved — that seemed to come through disproportionately. Even in the FAQ sections, you're often not signposted to the right support when you should be. I'd say that goes against fair treatment of vulnerable customers — that's the other big one.

Paul Wood  (42:50)

Yeah, for sure. Okay — shall we play Jargon Busters? I get to sit on the other side this time — I picked the term from the list and get to ask the question. For anyone who hasn't heard it before: Jargon Busters is a segment where we pick a piece of industry jargon and try to figure out what it means. This week's term is "hedging." Who wants to go first?

Russ  (43:23)

I'll go first. Hedging feels like another investment term — there's the saying "hedging your bets." If you're hedging your bets, you don't put everything in one place. If you've got a portfolio, you'd want it diverse enough that if one area drops, other areas give you stability, and potentially still an increase in returns.

Pat  (44:01)

As a general term, it's about — in the world of gambling, say you back one high-risk horse, you might make a smaller, opposite bet on a different horse with different properties, to dilute the winnings a bit but also minimise the losses. It's about hedging risk — using strategies to reduce the impact, or reduce the risk, of a particular investment.

Paul Wood  (44:32)

Yeah, I think we can award full points for this one — we've nailed it. It's making an investment to reduce the risk of adverse price movements in another asset. So yeah, exactly what you both described. Solid performance this time.

Next week we'll be diving into our next teardown, looking at investment platforms — same process, and we'll dig into the findings from that. Thanks everyone for listening. Normal service resumes next time with Amelia back from holiday. See you then.

Russ  (45:19)

Cheers.