From our work on all elements of insurance distribution compliance, we know that firms have a responsibility, particularly under the Consumer Duty, to equip retail customers to make decisions that are effective, timely, and properly informed. Some online sales practices, such as selective online choice architecture, and the presence of sludge and deceptive design, can put this at risk.
Firms must ensure that no aspect of their business unfairly exploits consumers’ behavioural biases. The FCA, therefore, has conducted research into digital design for financial products and services, and the consumer impact of sludge, deceptive design, timeliness and simplification, and has published a Research Note and accompanying Annex. The research findings include examples of good practice, and also note areas for improvement.
The FCA’s work focussed on two areas of concern and their potential negative impacts:
- Sludge (unjustified frictions or actions that make an option less attractive to consumers); and
- Deceptive design (design elements that may lead consumers to take actions which may be against their best interests).
The FCA also considered the positive impact of timeliness and simplification.
In the online experiment, the FCA investigated how different presentations of information in a consumer credit journey affected participants’ understanding of product features and the actions they then decided to take. The key finding from the experiment was that digital design matters. Different designs can help or hinder comprehension and they can also affect choices.
The brief report sets out some examples of good practice and/or areas for improvement under the headings of:
- design aspects;
- different customer groups;
- testing and quality assurance; and
- management information and oversight.