’Financial organisations must conduct research to better understand the context in which their customers make financial decisions,’ says head of research
Financial service providers need to simplify their communications with customers ahead of the Consumer Duty deadline, brand alignment business Definition Group has said.
In a statement released today (31 May 2023), the group highlighted that more than half of customers felt confused by the language financial institutions were using to describe products.
It found that from a survey of 2,000 customers, just 49% said communications from their bank were clear, while only 35% of consumers said communication from their banks was “easy”.
And just 32% felt communications were written “for people like me”.
Amy Graham, head of research at Definition’s brand strategy agency Brand Vista, said: “Our research shows that there’s much to do, as less than half of the public think firms’ communications are currently clear, with one in four saying they’re outright confusing.”
The Consumer Duty regulation – which comes into force on 31 July 2023 – sets out a slew of updated regulations for insurance firms and other financial services firms that must be implemented.
Alongside this, the FCA stated that firms should ensure they were making changes so that consumers received communications they could understand and offered fair value.
Definition claimed that two months before the deadline, financial documents were often containing an abundance of jargon, technical terms, acronyms, risk warnings and clauses, “making them hard to understand”.
Its survey found that 35% of consumers made a financial mistake due to “ambiguous wording”, while 33% of people who bought something on credit ended up paying more than they expected.
And only around half of the consumers surveyed could properly define terms such as inflation (51%), annual percentage rate (APR) (50%) and bankers’ automated clearing system (BACS) (43%).
The survey also found that more than half (55%) of parents caring for children with disabilities ended up with a financial service they did not need because of complex communications – three times as many as parents of children without disabilities.
The group added that people with disabilities were twice as likely to make a mistake with their finances because they did not understand the wording.
“Part of the FCA’s new policy is to encourage financial firms to be more explicit in the language they use when communicating with consumers,” Graham said.
“Financial organisations must conduct research to better understand the context in which their customers make financial decisions.
”This includes knowing what different people need and want.
”By doing this, they can shape their services and communications to best suit customer needs.”