The cost of living crisis continues to impact consumers with financial wellbeing remaining fragile despite signs of economic recovery. While the reduction in inflation offers a glimmer of hope, many consumers still struggle with high living costs and the need for support remains important for navigating challenging times.
A significant challenge is the persistent distrust among consumers towards financial service providers. Despite efforts to enhance transparency, scepticism persists, particularly among hard-pressed consumers. This highlights the need for providers to continue to prioritise transparency and fairness, ensuring clear communication and fair value are at the forefront to rebuild trust over time.
Consumer Duty has ushered in positive changes within financial services. While challenges remain, there are also opportunities to improve consumer experiences. More than half of those engaging with financial services face issues like lengthy waiting times and limited contact options, highlighting the need for improved customer service. Meanwhile, consumer confidence in understanding financial terms continues to vary, suggesting providers should continue to focus on enhancing consumers’ financial understanding through simplified communications and educational tools that help consumers grasp complex concepts more easily.
This report looks at the following areas:
- The evolution of consumer trust in financial services providers and their understanding of financial terms.
- Consumers’ interest in methods to improve their understanding of financial products and services.
- Issues encountered by consumers over the past 12 months when interacting with financial services providers.
- Observed changes in practices by financial services providers.
- Consumer behaviour towards certain aspects of the Consumer Duty.
- Innovations and marketing trends in financial services in light of the Consumer Duty.
Expert Analysis from a Financial Services Specialist
Consumer Duty drives positive changes, yet ongoing efforts are necessary to enhance trust and transparency in financial services.
Stefania Apostol, Senior Financial Services Analyst
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Executive Summary
- Opportunities in light of the Consumer Duty
- There are opportunities to increase trust
- Continue to help consumers improve their financial knowledge
- Enhance consumer support by integrating diverse service options
- Market dynamics and outlook
- Consumers continue to face challenges despite economic recovery
- Nearly all adults possess a financial product
- Graph 1: financial product ownership, 2024
- Consumer Duty: a year on
- What consumers want and why
- Providers of current and savings accounts continue to enjoy the highest levels of trust
- Mixed levels of confidence among consumers regarding their understanding of financial terms
- Graph 2: confidence in understanding of financial terms, 2024
- Terms and conditions written in plain English continue to be the preferred method of improving understanding
- More than half faced issues when interacting with financial services providers
- Graph 3: issues experienced when interacting with financial services providers in the last 12 months, 2024
- Consumers have mixed views on changes in financial services
- More than half of adults trust financial services providers to suggest products that are in their best interests
- Innovation and marketing
- Providers focus on enhancing consumer understanding
- Providers enhance pricing strategies
- AI-powered virtual assistants aim to enhance consumer support
- Providers design products to meet diverse customer needs
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Market Dynamics
- Macro-economic factors
- UK’s economy improves
- Graph 4: CPI inflation rate, 2021-24
- Interest rates are declining but remain relatively high
- Graph 5: Bank of England base rate changes, 2021-24
- Financial wellbeing is fragile
- Graph 6: the financial wellbeing index, 2016-24
- Most people are still feeling the effects of higher prices
- Graph 7: cost of living related issues noticed in the last two months, 2024
- Nearly all adults possess a financial product
- Graph 8: financial product ownership, 2024
- Regulatory and legislative changes
- FCA’s Consumer Duty is introduced
- Consumer Duty focuses on four key consumer outcomes
- The FCA assesses the impact of the Consumer Duty and considers future steps
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What Consumers Want and Why
- Trust in providers of financial products
- Providers of current and savings accounts continue to enjoy the highest levels of trust
- Graph 9: trust in financial services providers to act in consumers’ best interests – NET, by product, 2024
- Product ownership boosts trust
- Graph 10: trust in financial services providers to act in consumers’ best interests – NET, by product ownership, 2024
- Persistent distrust challenges providers’ efforts
- Graph 11: distrust in financial services providers to act in consumers’ best interests – NET, by product, 2023-24
- Hard-pressed adults continue to be more inclined to distrust financial services providers
- Graph 12: distrust in financial services providers to act in customers’ best interests – NET, by financial situation, 2024
- Gender pension gap affects women’s trust in providers
- Understanding of financial terms
- Mixed levels of confidence among consumers regarding their understanding of financial terms
- Graph 13: confidence in understanding of financial terms, 2024
- Confidence in understanding ‘negative equity’ declines
- Graph 14: consumers who are very or slightly confident in their understanding of ‘negative equity’ (NET), by mortgage and outright owners, 2023-24
- ‘Hard credit check’ remains one of the least understood terms
- Graph 15: confidence in understanding of ‘hard credit check’ – NET, 2023-24
- Less affluent adults are least confident in their understanding of financial terms
- Graph 16: consumers who are not very or not at all confident in their understanding of the financial terms, by financial situation, 2024
- Help women overcome the confidence gap
- Graph 17: consumers who are not very or not at all confident in their understanding of financial terms, by gender, 2024
- Use engaging tools to help consumers understand ‘compound interest’
- Graph 18: confidence in understanding of ‘compound interest’ (NET), by ownership of selected financial products, 2024
- Methods to improve understanding of financial products and services
- Terms and conditions written in plain English continue to be the preferred method of improving understanding
- Graph 19: interest in methods to improve understanding of financial products and services, 2023-24
- Continue to simplify T&Cs in general insurance
- Chatbots could help younger generations understand financial products better
- Graph 20: interest in chat bot services to improve understanding of financial products and services, 2024
- Blend methods to boost younger generations’ financial understanding
- Graph 21: repertoire analysis of methods to improve understanding of financial products and services, by generation, 2024
- Issues when interacting with a financial services provider
- More than half faced issues when interacting with financial services providers
- Graph 22: issues experienced when interacting with financial services providers in the last 12 months, 2024
- Lengthy waiting times are at the forefront of consumer challenges
- Graph 23: issues when interacting with financial services providers in the last 12 months, 2024
- Younger generations value varied communication options
- Almost a third of those with a mortgage product report long waiting times
- Noticed changes from financial services providers
- Consumers have mixed views on changes in financial services
- Graph 24: changes noticed in the last 12 months, 2024
- Older generations are less aware of improvements in communication
- Graph 25: change noticed regarding ‘clearer communication about product/service benefits and risks’ in the last 12 months, by generation, 2024
- Investment account owners see increased fee transparency…
- …but the sentiment is not widespread
- Graph 26: change noticed regarding ‘transparency around fees and charges’ in the last 12 months, by financial situation, 2024
- Simplify product and service cancellation processes
- Behaviours towards Consumer Duty regulation
- Over half of adults trust financial services providers to suggest products that are in their best interests
- Graph 27: behaviours towards Consumer Duty regulation, 2024
- Younger generations have more faith in providers
- Graph 28: selected behaviours towards Consumer Duty regulation, by generation, 2024
- Hard-pressed consumers doubt providers’ attention to their best interests and diverse needs
- Graph 29: trust in financial services providers to take account of the diverse needs of their customers, by financial situation, 2024
- Graph 30: trust in financial services providers to suggest products or services that are in consumers’ best interests, by financial situation, 2024
- Enhance transparency of fees to boost trust
- Clarify effects of incomplete disclosures for financial product applicants
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Innovation and Marketing Trends
- Competitive strategies and launch activity
- Providers focus on enhancing consumer understanding…
- …and partner with organisations to simplify and clarify communications
- AIG Life updates system for clearer insurance applications
- Providers enhance pricing strategies
- Banks remove overseas fees to boost consumer value
- Lloyds caps broker fees to ensure fair value
- AI-powered virtual assistants aim to enhance consumer support
- Nationwide and Santander launch sign language support
- Allianz introduces a new home insurance product
- LV= launches new ‘Lifestyle’ range to offer more flexibility
- The Exeter enhances Income First product
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Appendix
- Report scope and definitions
- Report scope and copyright
- Abbreviations and terms
- Methodology
- Consumer research methodology
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