Consumer Duty: Three Years In

Episode transcript

Amelia (00:16)
Hi, I'm Amelia.

Paul Wood (00:17)
I'm Paul.

Pat (00:17)
I'm Pat.

Russ (00:18)
I'm Russ.

Amelia (00:18)
And this is Fin the Week. Welcome back. We're here in Q3 and a full house.

Paul Wood (00:24)
Yeah, it's been a little while, hasn't it, since we've all been together?

Amelia (00:28)
It certainly has.

Pat (00:28)
Holidays.

Pat (00:29)
And kids.

Amelia (00:31)
Big time for Russ. Congratulations on the new addition.

Russ (00:35)
Thanks, yeah, I'm a father of two now. I think that's it now. We'll have to see.

Amelia (00:44)
You think you're done. Well, we were just saying, weren't we? You didn't time it great, right in the middle of a heat wave. With a newborn, isn't the best, is it?

Russ (00:50)
Yeah, it's been a lot of work keeping him cool, my wife. But hopefully it will get a bit cooler soon.

Amelia (01:00)
Fingers crossed, fingers crossed.

Paul Wood (01:01)
Yeah, it's a bit of a stinker at the moment, isn't it? It's kind of a proper heat wave.

Amelia (01:06)
It is, it is. And we were saying as well, you can't not talk about it. It's very hard not to start an email. Every single email you send, like, don't say it, don't say it. But hot— hope you're keeping cool. Yeah, we hope you are managing to keep cool.

Amelia (01:18)
And Q3 is officially on, and this is very exciting. We're launching a new edition called the Trust Reset. So, a busy quarter for financial services: consumer duty turns three, the EU AI Act has more rules kicking in, and the SDR, the anti-greenwashing regime, is hitting its two-year point.

So we've called the edition Trust Reset because the through line is how trust in FS now gets earned, evidenced, and audited, not just claimed.

Paul Wood (01:52)
Yeah, and I think when we were planning the next few months' worth of content, the thing that stood out was that July specifically is the anniversary month. It'll be three years to the day at the end of the month since the FCA brought out consumer duty. So that's a big anniversary.

And what we've planned to do over the next few weeks in particular is focus on consumer duty. Rather than just discuss it and what it is, because a lot of people will be doing that at this time, we're actually going to dig into what has actually changed. So something we're going to be talking about today is a teardown process we've been doing, where we've picked some real case studies and looked into: how are firms tackling consumer duty? Are there still issues present, or are things looking good at the moment?

So we've got a four-part teardown series over the next four weeks. For each one, there'll be three firms we're looking at, and they'll be split into subsectors. So you've got retail banking, investments, mortgages, and protection insurance. And when we reach the end of that series, the final episode will be coming out on the anniversary of consumer duty. So it'll be a good opportunity to just look at how everything has been going.

Amelia (03:20)
I think it's going to be really interesting. Before we dig in, can someone give a quick recap? What is consumer duty, why does it matter, and how are we looking in 2026?

Paul Wood (03:31)
Yeah, I think Russ, you're probably the closest to it. You've been doing a lot of work in this area, so I'll put you on the spot. Do you want to take that one?

Russ (03:40)
Yeah, well, like you say, it's been around for a few years, and it sounds like now they're really clamping down on the evidence side of consumer duty. Essentially, it's looking at FCA-regulated firms and ensuring they deliver the best outcomes for consumers. There's a set of guidelines called PRIN 2A, which outlines a number of different rules to conform to. There are four specific outcomes that firms need to look at conforming to.

And yeah, it's essentially to make sure that firms offer fair and transparent pricing, that there aren't any hidden terms, that consumers can compare products and understand the differences between them, ultimately to make an educated decision themselves on which product to choose.

There's also the focus on vulnerable customers, to make sure that people who perhaps don't have smartphones or internet access can also receive communications, and that those communications are explained in plain English so people can understand them— especially in finance, where you have a lot of acronyms— and they know what they're signing up for.

Also that they're signposting to things like help if you're in debt. If you're looking to get an overdraft, for example, the fees can be quite high; if you're looking to take out a loan, our company is providing financial advice on how to improve your finances, and they're not just capitalising on people taking out these loans and getting locked in and paying high interest over the years. They have an obligation to provide advice on managing your finances better and improving the situation for those consumers.

So the consumer duty, in terms of an FCA-regulated firm— the reason it exists is because they have a duty to the consumers to provide a fair service, really, and the best consumer outcomes. So perhaps, over the next few weeks, we can discuss those four outcomes. One of them is price and value, consumer understanding, consumer support— and also fair value in terms of cost as well. All of this, I think, we'll discuss over the next few weeks.

Amelia (06:42)
There are these three cross-cutting rules: act in good faith, avoid foreseeable harm, and enable customers to pursue their financial objectives. I'm keen to know— when this first came in, what was the feeling amongst the industry? Was this seen as a good thing?

Paul Wood (06:57)
I mean, it's hard to speak for everyone, but I think from our perspective it was seen as a good thing, because it's looking to do good. It's not adding rules for rules' sake. It's just asking companies to do the right thing. And I suppose the big change, the thing that might make companies groan a little, is the fact that you need to surface more evidence.

So, where companies might once have been left to just look after their customers themselves, now they've got to still do that but also surface all of the evidence and report it back to the FCA. It's another piece of red tape, I suppose people might see it as. But no, I think generally no one can really argue with what it's trying to achieve. It's trying to make the world of financial services and financial products a friendlier place for everybody. And you can't argue against that at all, I don't think.

Russ (08:05)
I was actually looking back at the— because there was a diagram the FCA released a couple of years ago when they first introduced the regulation. The guiding principle of consumer duty is that a firm must act to deliver good outcomes for retail customers. I think it's probably worth highlighting as well that this is focused on customers, on consumers— hence the consumer duty terminology around it.

And as you mentioned there, Amelia, those cross-cutting rules sit underneath that guiding principle. But then, ultimately, those four outcomes of what needs to be delivered. So I missed one out when I mentioned it just then— the four outcomes: products and services, price and value, consumer understanding, and consumer support.

Each of those four is judged alongside whatever you're selling, really. Are your products and services easy to do? Are they fairly promoted and sold? Is the actual price and value of those— also in the market conditions, compared to your competitors and what you should be selling them at— is that fair? Can the consumer understand what that is? And then, are they getting the correct support?

And we'll probably get onto this, but it's amazing how much of that information is hidden or basically buried away. One of the terms you'll see quite a lot is "sludge". Do firms find it difficult to access that real information that will move you from one step to the other— especially if there are accessibility needs, which need to be taken into account? All of these products and services and all of this help needs to be accessed the same, no matter what kind of access needs you have— whether you're using a screen reader, whether you have any kind of motor disabilities in terms of how you access or interface with these digital channels.

So all of this needs to be taken into account. I think, from the research you've done, definitely moving into the third year, it's going to be really interesting to hear the plans over the next couple of months. But they're going to be clamping down more on— you know, have companies flag changes in their board reports? Which is actually, as I talk about with UX Duty— it can scan a website and find multiple issues. Are those issues now being fixed for the consumer? Is there now evidence that websites are accessible, that there aren't hidden terms, that value is fair for the consumers?

So it's going to be really interesting now, and it'll be interesting to see how the FCA reacts and what kind of pressure they're going to put on firms to fix anything that's wrong.

Amelia (11:36)
And is that kind of— sorry, is that kind of where we are in 2026? So we're three years down. Is that, you know, 2026 the year of inflection?

Paul Wood (11:46)
Yeah, I've spent some time reading the FCA's summary of board reports covering the first two years of consumer duty. The tone of the document is very much, "we understand everyone's still figuring this out, it's all new," but it has the feeling that year three is when it gets real.

They sort of said: year one, you were figuring it out and we've highlighted some flaws; year two, you started to address those flaws; now it feels like there's no excuse. They don't explicitly say that, but that's the vibe it gives. And in their year-two review of board reports, they broke down the positives that they, the FCA, recognised. They said there was more board oversight, so it was clear that firms and their boards of directors were taking this seriously. They were engaging with the documentation and at least signing it off.

There were better action plans— boards were recognising flaws and coming up with action plans. And there was better evidence of quantitative and qualitative data sources being used to compare what was going on, specifically looking at year two versus year one.

But they also listed out some areas for improvement. They highlighted that there was too much data that just wasn't tied to outcomes. So firms were great at sourcing data, but they weren't necessarily very good at tying it back to what it actually meant. And I think that's something we can probably all relate to in the world today, where you can get access to all sorts of user data, but sometimes it doesn't really matter if you don't give it a reason.

There's something else that stood out, and this ties back to something you were talking about before, Russ, about how the scope is on consumers, on end users. But something the FCA highlighted is that firms were quite weak in terms of monitoring the distribution chains. And I think this is going to be a big theme for the year ahead.

I've experienced this in conversations I've had with people in finance firms, where they almost disregard the conversation about consumer duty because, in their mind, "we don't sell to consumers, therefore we're not in scope." But in actual fact, a lot more firms are in scope than they might realise, because if you're part of a distribution chain that eventually reaches a consumer, then what you're doing is in scope.

So if you're a technology provider for a fintech that eventually leads its way into a fintech's banking service that a consumer uses, then you're very much in scope. And that might be a technicality, but things like how easy your systems are to use, how good it is at surfacing consumer data, and how easily consumers can request their data be removed from your system— that's all very much in scope.

And I think people are going to need to recognise that if you're part of a distribution chain, then you're in scope. And then there was also a lack of evidence of boards challenging findings. The FCA alluded to something where maybe board members were reviewing their reports and then just approving them, but they weren't necessarily challenging findings. So there was a push for people to actually engage with this stuff and challenge findings.

And then, finally, there was too much focus on products and services and not enough on consumer understanding and consumer support. And I can understand why that would be, because proving consumer understanding and good support outcomes is arguably harder than assessing that your products are correctly positioned. So I can see why firms potentially struggle with that.

But I think year three will be the year when the FCA says, "okay, no more excuses, now you've got to figure this out." So it's good timing, and that's why we're really looking at the teardown approach we're going to be doing, because that's really what we're focusing on— the consumer understanding and the support elements. So I think those are the big themes that stand out.

Amelia (16:16)
Do you think they'll be—

Pat (16:16)
I think accessibility is a really, really important thing. You alluded to it there, Russ, talking about support for screen readers and support for people who aren't able to use their hands, either temporarily or on a permanent basis. And I think, as a whole, the banking industry, or the finance industry in general, has a really, really long way to go with accessibility.

There's one thing: making your website accessible so that people can understand your products and read about your interest rates and your terms in an understandable, easy-to-access manner. But then you've also got to think about what happens when that user logs into your online banking system— and your online banking system is provided by a vendor who built their platform in 1998 and have just been extending it gradually using blue tack and sticky plaster over the last 25 years.

And it's been an absolute horror show, and most banking platforms are like that. One example— I'm not going to say the name of the bank, but one of the firms that I bank with— I went on there a little while ago and I was looking at my credit card statements, and I only went back like two years online, and I needed to look back earlier than that for various reasons. So I messaged their customer support, and they said to me, "okay, we don't have those old statements online. We need to raise a separate support ticket and we'll post you the bank statement."

And I just thought, that's absolutely ludicrous in this day and age, where I've just surfaced the credit card statement to me. Arguably, post is an accessible form, but it was just clunky and annoying and not accessible. And those are the kind of challenges that these banks should solve.

And it's probably not the bank's fault. It's probably, like you mentioned, Paul, the fault of the upstream supplier of their banking system. It's just got serious limitations in one way, shape, or form that prevent them from solving that problem. There are clients that we've worked with who have asked us to style their banking systems, and then, as a developer, you log in and it's just an absolute disaster.

You're working with HTML that was obviously written before CSS layouts were a thing in 2001. It's definitely not accessible, and to change that and make it formally accessible would be an absolutely huge task— especially if you're a banking provider that provides online banking services to 100, 200 banks across Europe.

You're talking millions and millions of pounds' worth of investment to overhaul that, bring it up to date and make it modern, combined with the risk of pulling that whole system out and putting in a new system for every single one of your clients. A massive undertaking. So it'd be interesting to see— I guess banking as an industry is quite behind. You compare the standard high street banks to challenger banks like Revolut, who are absolutely on it and smashing it out of the park. Those high street banks are going to struggle to bring their platforms more up to date. So it'll be interesting to see how hard the FCA come down on this sort of thing, and whether they force them to move forward or not.

Russ (19:29)
I think a lot of firms as well are going to be adopting AI as a solution to fix all of this, and I'm not 100% convinced that AI will just be able to take an app or website and make it accessible.

There's a couple of reasons. I was just looking— so WebAIM do a report every year looking at the top one million homepages in the world, based on the criteria they use. In the last year, the number of page elements has increased by 22.5% on average on a home page.

And I think a big part of that is AI. And even if these firms manage to fix the underlying accessibility needs in terms of a checkbox— so it has semantic HTML, it has the proper headers, it has the proper form labels, so it can be used by a screen reader— I think what these firms are probably going to miss is that qualitative feedback.

Are their digital channels cognitively accessible? Are they now just overwhelming users with information and elements and pages, making them even more difficult to understand? From a checkbox perspective, it might be like, yes, this is accessible. But if they've increased elements on the page by 20%, or if they've written all their copy with AI, and it's difficult to understand and even more confusing now, then they still might not be conforming to the regulation. And actually, by making what they perceive as their website accessible, they've made it worse and more confusing. So I think we're going to see a lot of systems overhauled quickly using AI and perhaps becoming even more confusing and more difficult to use.

That's worth keeping an eye on, and the WebAIM report suggests that websites are actually getting even more complicated.

Pat (21:41)
Then, on the flip side, if you use AI well, you can quite easily turn a really verbose, legally-styled contract into a form that can be read and understood by someone with a reading age of 12, using a large language model. So there's this huge opportunity for firms to take a lot of their really complicated documentation

Pat (22:07)
and actually convert it into a form that is much more accessible.

Russ (22:11)
What they need is an agency to show them how to do that.

Amelia (22:16)
Do you know one?

Pat (22:18)
Yeah. A thousand pounds a month.

Paul Wood (22:21)
And I think consumer duty is really interesting generally, even for firms that aren't within scope, or even for non-finance firms, because it reminds me a lot of accessibility guidelines. You've got the Web Content Accessibility Guidelines, WCAG— so, for instance, all public sector sites need to achieve AA standard with WCAG in the UK.

And that's all the stuff we've just been talking about with accessibility. So, making sure screen readers can use a site, making sure people who are, say, colour blind can— there's enough colour contrast to make sure they can still read things. But the thing that's always struck me about good accessibility is that it's just good practice anyway. A site that is accessible to AA standard is better for everyone. It's not just better for people with challenges, it's better for anyone, because it's just a better system. It's better built, it's easier to use.

And I think the same applies to consumer duty, because consumer duty goes a few levels deeper. It's looking at: is what you're doing easy to understand? Do you know what you're buying? The sludge practices are interesting, because— the penny dropped for me about sludge practices when I read an example. It's a bit like when you sign up for a subscription: you can sign up online for the subscription, but then, to cancel the subscription, you need to phone up and go through a call centre to cancel it.

That's a sludge practice, because, yes, it's possible to cancel it, it's something you can do, but it just adds a hurdle that will stop a lot of people. And, to take your example of the bank that wouldn't easily surface beyond two years' worth of bank statements— I mean, it's not a huge issue, because you can get hold of them, but it is still kind of a piece of sludge, because it's a hurdle that doesn't necessarily need to be there.

And so I think, yeah, consumer duty— even if you're not in scope, or if you don't think it's that important— there's so much to learn from it, because if you tick the right boxes, you're going to be making something that's better for everyone.

Russ (24:39)
Yeah, 100%. I mean, we'll probably get onto UX Duty and what it is, but there was one example that springs to mind where the platform quite quickly found that, at the beginning of the savings account process, the link to the terms and conditions text was light grey against, I think it was, a beige background.

And it was like, you don't need a WCAG ratio check to see— I struggled to see it. And last time I checked, I had 20-20 vision. I struggled to see it. So are they doing that on purpose? Surely not. But would they? I don't know. It raises that question.

I think if there's anything to suggest they're making the terms difficult to find, that is a real, serious issue. And it isn't a big fix— just increase the contrast of where your terms and conditions are, and the link to them. It's pretty simple. Every designer, or the calibre of designers that would be part of these teams working for these big firms, should know this stuff. It's like design UX 101 basics. Get your colour contrast right, but especially on links to important terms and eligibility information.

Amelia (26:16)
Well, that actually seems like a good chance to talk about UX Duty. What is it? Why don't you explain how it kind of works?

Russ (26:22)
Yeah, so UX Duty really started off as a UX research app. Initially it was looking at these UX heuristics of platforms— so it was looking more at whether a website used minimal design, whether it had good error flagging, things like the readability of the language on the page. It also looked at accessibility, to make sure it was usable for everyone, no matter their ability or situation.

I think, over time, it's really doubled down on the fact that it's a great tool for checking whether firms— whether it could flag anything that firms could use as evidence, or at least as a basis for evidence and reports, to improve in line with consumer duty. And I've actually just recently overhauled the scanning engine as well.

It would go to a webpage and scan the page in line with the PRIN 2A rules. We're also building up a database of checks looking at the underlying markup as well. So it is using AI— it uses Claude for that initial scanning— but to get around the fact that Claude often hallucinates a bit, it would often go away and find things which weren't right.

It would come back and claim things— that content wasn't fairly positioned to actually visit the page, or that FCA or FSCS logos weren't there when actually they were. So we're evolving it to cut out so much hallucination, so it looks at the underlying code.

And then the other thing it does is check against the Web Content Accessibility Guidelines. So there are these three: the qualitative scan, the factual scan, and then the WCAG scan. And then it compiles all this information into a set of findings.

It's only checking your digital channel, so it forms part of a board report. As you mentioned, Pat, you actually have experience with these banks or firms— maybe via email, maybe via calls; you may have to pop in and speak to them if you're applying for a mortgage or something like that. You'd often have an in-person meeting, and it's important firms have those processes right as well, in line with consumer duty.

So UX Duty scans your digital channels and finds things that should be fixed, or that might be in breach of the consumer duty rules, using those checks. And that evidence can be put to a board report. You can assign people to fix the things it's found, and then you can rerun the scan to show that things have been fixed.

As an example, I think there was a firm which— alongside some basic checks for explanation of acronyms using plain language, which it picks up on— it would also pick up on things like… for example, bank switching. One of the firms was offering a 200 pounds offer for switching banks, but you actually had to deposit a certain amount of money to get the offer.

So you have this big headline on the page— it's like "200 pounds", I think there was another one that was 600 pounds— but in tiny, tiny small print, which is, you know, grey against a white background, it says you need to deposit four grand to get it. And in terms of PRIN 2A, there are specific rules to increase the emphasis and make the terms clear to receive that offer. It wasn't meeting those obligations.

So saying that you need to deposit four grand to get 600 pounds for bank switching needs to be more prominent and needs to be easy to find. You can't have a massive 200-pixel font size saying "receive 600 pounds", you click on it because you're excited about switching and the whole offer is so persuasive that you think you're going to get this money— but you might not have four grand to put in to get the offer, so you never get it. And it's examples like that which it's finding using its scanning engine. I tested it on three firms.

One of the exciting things about UX Duty is its integration with analytics. We've only managed to test that with Indulge at the moment, because we have the API access into Google Analytics and Microsoft Clarity.

But the idea of it— and this is kind of going back to my UX experience— is that when you attach UX Duty via an API, it will find journeys that have friction, using this friction-journey crater, really. One of the best practices with UX when you're looking at analytics is to look for outliers in terms of data.

So if you see a page that has really low engagement but it's a high-value page, then that's potentially an outlier. If you see a page with a really, really high exit rate, but it's an important page in the funnel, then that's an outlier you need to be looking at. So what we've introduced with UX Duty is API integration: you can pull in your analytics, you can set some UX signals, and it will highlight some journeys which have potential friction or sludge, based on these analytical signals. You can then scan those pages in the journey, and it will scan using those three methods that I outlined. And it would give you a consumer duty risk score, which would be high, medium, or low, and then a set of findings.

Now, I've only tested it using these three firms and setting up manual pages to track, because we don't have access to their APIs. But it'd be really interesting to see, if we could work with one of these big firms and access their Google Analytics, exactly what it's capable of. The journeys that I've put in and used with it are quite manual— I think one of the bank switching journeys is eight pages, so I've manually had to put in each URL. Then I run a scan, and it's come back with like 80 issues.

It's finding a lot of accessibility issues— I think 40%. I think it found 200 issues; well, it flagged 200 findings across three firms, probably looking at five or six pages per firm in the bank switching journey. So it's flagging a lot of findings. A lot of them are accessibility, as we discussed.

Going back to WebAIM, I think 95, 96% of all homepages in their review have accessibility issues— and we're not just talking about one or two; I think the average is like 40 or 50 or something. It's pretty high. So, looking at underlying code, you can normally find some accessibility challenges. But those 60% are really quite interesting, because they're looking at the actual FCA consumer duty rules and, like I said, analysing the underlying code to find where things are missing, and also giving a more qualitative opinion on perhaps what's missing.

And it's not going to be facts all the time. I think it's to give these firms an idea of what needs to be improved. They then take that, they can speak to their customers, and they can be the human in the loop validating these findings. When you're talking about large data sets— so if we let it loose on a journey on a big bank's website, for example, based on analytics, and it looked at 20 pages— then they can filter by what UX Duty thinks is high risk. They can look at those one by one, and it takes away that whole initial human analysis of finding where these challenges might be. So it will evolve over time, and it'd be good to talk about more specific examples over the next few weeks, as we focus in on different teardowns.

Amelia (35:31)
Well, that seems like a good place to— maybe talk us through: what are we going to be doing over the next few weeks? How's it going to work?

Paul Wood (35:38)
Yeah, so, as Russ mentioned, we've got this tool, UX Duty. And this isn't a pitching session for that— it's more that we've built this internal tool, which we've realised is really useful for analysing the consumer duty outcomes, particularly things like consumer understanding.

So, with the anniversary coming up, we've basically got four teardown sessions lined up over the next four weeks. Russ has been looking at the first one, which we'll be talking about next week: bank switching. Taking three different types of bank and looking at the journeys on their digital platforms that you have to go through to initiate a bank switching process.

And the thing I think is really interesting about this methodology, and using a tool like UX Duty, is that it looks at the journey very plainly. It doesn't have context. And that's useful, because that's where a lot of consumers will be coming from. They'll be starting the journey without much knowledge necessarily. They'll just know, "I want to switch bank for one reason or another," or they're enticed by an offer, like the offer that Russ was just talking about.

And so, running a tool through it without any prior judgment, the tool can just pick out the facts and say, "okay, this landing page has this issue: yes, there's an offer there, but the terms and conditions, which are meaningful, aren't presented prominently enough." Then a human— we can look at that, we can discuss, is that fair, or is that not fair? But, importantly, it highlights the areas that firms themselves, and the boards behind these firms, should be aware of. And they can judge it. They can say, "well, we need to entice people onto our page with a clear offer, and then we'll present the terms and conditions." And they can argue whether that's the right way to do it or not. But the tool that we're using, and the method we're using, is trying to surface these discussion points, and it's proven quite useful at doing that.

So, like I say, we're going to go over the next four weeks. We're going to start by looking at bank switching. The second one— let me just double-check my notes to get the right order— so then we're looking at investment products. So, what they call robo-investing: the services that consumers can sign up for, investing money. Then looking at mortgages, and then, finally, protection insurance.

So, things like life insurance policies, stuff like that. Each week we're looking at three case studies. We're running their journeys through a process, surfacing the things that stand out. And we're going to be discussing: are there any common trends? Are there areas for debate, where you could ask what's the right way to tackle this?

And I think it will just be an interesting way to discuss consumer duty and how things are going right now— particularly, like I say, that consumer understanding point. Because, fundamentally, it's easy to say the website is just the first step. A user has to initiate a process through there, but that's where a lot of consumers will form a lot of their opinions, and how they then have a relationship with a brand from that point.

And so it's where you really have to set out your stall and be clear on what you're offering. So that's what we'll be looking at.

Amelia (39:20)
I think there'll be some really interesting discussions that we're going to be having over the next few weeks. I mean, we've touched upon it— we'll talk a little bit more about week one shortly, but first, should we play some jargon busters?

Paul Wood (39:31)
Yeah, let's give it a go.

Amelia (39:32)
We haven't all been here for a while, so we've had some mixed successes in this. So, if you've not caught this before: every week, I put the guys to the test. I give them an industry term to see if they can work out or explain what it means. This week's word is escrow.

Paul Wood (39:52)
This is good timing. Pat, you're working on an escrow project right now.

Russ (39:56)
Maybe, maybe— yeah, maybe Patrick go first? Or is that unfair?

Amelia (39:56)
Amazing. Well, let's see how well you can explain it, then.

Pat (39:56)
We know that. I'm very familiar with escrow.

Paul Wood (40:04)
First and last, just— yeah.

Pat (40:05)
Yeah, so escrow is the process of holding funds within a third party— a kind of mutual third party— as part of a transaction, so that one party effectively can't withhold the funds or mess around with them, creating a conflict of interest. So, avoiding conflict of interest in the transfer of funds, I guess. It's my fairly clunky definition, but I think it's along the right lines.

Amelia (40:32)
Pretty good. Has anyone got anything to add to that?

Russ (40:34)
Yeah, I mean, I had heard of it before this project as well, but I'd heard of it in the context of domains. So often your payment for domains would sit somewhere else, between the buyer and the seller, which is essentially escrow.

But yeah, obviously we were looking at it in a different context recently, for the project.

Pat (41:05)
Yeah, so it could be, if you're buying a house or something and you need to pay a deposit, then you might pay the deposit into a third party. And then, whilst it's in the third party, you can complete the formalities and the contracts. And then, once it's all signed, the third party can award the deposit to the vendor. It avoids this risk where you pay the deposit to the vendor before you sign the contract,

Pat (41:28)
which means the vendor could just run off with the money; or, on the flip side, you sign the contract without paying the deposit, and then the vendor is subject to risk. That's going to de-risk that transaction. Another one is deposits on rental properties, where, rather than a landlord holding the deposit and then withholding it at the end of the term due to claimed damage that isn't there, the deposit can sit within an escrow platform. Or, if somebody's acting as an escrow, then it's that third party's call as to how much of the deposit is withheld, based on how much damage there actually is in the property or not. So yeah, that's kind of what it's useful for.

Amelia (42:11)
Anything to add, Paul?

Paul Wood (42:13)
No, I can't— I don't think there's anything I can add. I think most people in the wild will have probably come across the process as part of renting or purchasing a property, but won't necessarily have the name for it.

Amelia (42:25)
I was going to say, if you watch any of those American real estate programmes, you'll be very familiar with it. But the official meaning we've got here: a neutral third party holding assets during a transaction until conditions are met. So, well explained there. One point all round. And, of course, we'll have more of that next week. And we'll be kicking off the teardowns properly.

Paul Wood (42:41)
Full points.

Amelia (42:53)
So I know we touched upon it, but let's just confirm: what are we starting with next week?

Paul Wood (42:55)
Russ, you want to take it?

Russ (42:55)
Yeah, well, I think we're going to— instead of just looking at one firm, I think we're going to look at a large provider, a mid-tier provider, and then a more challenging kind of provider as well, just to give a balanced view.

I think we're going to be referring to them as firms— probably firm A, firm B, firm C— so we keep them anonymous. But hopefully there'll be some common themes and some interesting points to debate.

Amelia (43:33)
I'm looking forward to getting into it. So that is our first teardown episode next week. We'll see you then. Thanks for listening, and have a great weekend.

Pat (43:41)
Cheers, guys.

Russ (43:41)
Cheers, bye.