FCA Review: Consumer Duty Products & Services: good practice and areas for improvement

Overview

On 10 July 2026, the FCA published its review of firms' approaches to the Consumer Duty Products and Services Outcome. The review draws on a qualitative survey of 38 firms across banking, insurance, consumer finance, investments, payments and other sectors. This data was analysed alongside supervisory intelligence and insights from earlier multi-firm work to help identify practical examples of good practice and areas where firms still need to improve. A recurring theme throughout the review is the need for firms to demonstrate a genuine understanding of customer needs and to evidence how their actions improve customer outcomes.

Product and Service Design and Target Market

The Duty requires manufacturers of products and services to operate product approval procedures that specify the target market at a sufficiently granular level and ensure these products and services meet the needs of retail customers in that target market, including vulnerable customers.

Good Practice Identified by the FCA

• Mapping customer needs to product design: The strongest firms started with a detailed understanding of customer needs, characteristics, objectives and behaviours before designing or reviewing products. Many synthesised research to develop ‘customer profiles’ to ensure that product features matched customer requirements. 
• Use of ‘negative target markets’: Some firms identified customers for whom a product would not be suitable, helping to prevent foreseeable harm and inappropriate sales.
• Testing target market compatibility: Once the product or service had been designed, many firms conducted further assessments to test that the final product was compatible with the target market. These involved customer impact assessments which mapped end-to-end customer journeys, identification of risk of harm at each stage for different customer segments, and vulnerability impact assessments. 
• Adaptations of products & services and customer journeys: These assessments enabled firms to identify issues and redesign products before launch, making adaptations where appropriate for different customer segments to make them more inclusive.
• Smaller firms: The FCA noted that smaller firms can achieve strong outcomes without extensive resources by using: customer feedback; complaints analysis; front-line staff insights drawing on their knowledge of the customer base; and supporting direct front-line staff reporting to senior management.

Areas for Improvement

• Insufficiently granular target markets: Some firms described target markets in simplistic or generic terms, suggesting a lack of understanding of customer needs or insufficient assurance that products are aligned to the target market. The FCA observed that firms often failed to explain why specific customer groups were appropriate given the product's risk profile. 
• Identifying vulnerable customers: Some firms focused on processes to identify vulnerable customers rather than also how products and services could be adapted to meet these customers’ needs.

Monitoring and Review

Monitoring customer outcomes is a key part of the Duty. Firms must regularly monitor the outcomes that retail customers receive from: the products the firm manufactures or distributes; the firm’s communications with those customers; and the support the firm provides to those customers. Firms’ products should be reviewed regularly to make sure they continue to meet the needs, characteristics and objectives of the target market and firms should act if they identify a risk of potential harm.

Good Practice Identified by the FCA

• Outcome-focused management information (MI): Almost all firms are capturing baseline data on customer feedback, queries and complaints. Many are also now looking at customer behaviours, such as monitoring product usage and cancellation trends.

Areas for Improvement

• Limitations in monitoring: Some firms are failing to move beyond routine reporting to active risk identification and intervention. These firms are not using MI to trigger targeted, risk-driven reviews when potential issues emerge in relation to customer outcomes.
• Excessive reliance on complaints: Complaints data can provide valuable insights but MI needs to draw on wider data sources to give insights on consumer outcomes. The absence of complaints does not necessarily indicate good outcomes and may leave firms unaware of emerging harms.
• Poor validation of interventions: A notable weakness was firms' inability to demonstrate whether product or service changes genuinely improved customer outcomes. FCA expects firms not only to implement changes but also to measure their effectiveness through evidence-based evaluation. Several firms could show that changes were popular but could not demonstrate improved customer outcomes.

Distribution and Third Parties

Manufacturers must ensure that their intended product distribution strategy is appropriate for the target market and take all reasonable steps to ensure their products are distributed to the target market. Distribution channels and arrangements must be appropriate and reviewed on a regular basis. Distributors should ensure distribution arrangements meet the needs, characteristics and objectives of the target market and again ensure that they are only distributing products to this market.

The FCA highlights its recent joint work with the ICO on sharing vulnerability-related information across distribution chains, recognising the importance of collaboration between firms, and also its consultation in CP26/23 on proposals relating to allocation of responsibilities across distribution chains. For more information on CP26/23, see our Legal Update here.

Good Practice Identified by the FCA

• Tailoring distribution strategy to target market needs: Many firms did this for customers in vulnerable circumstances within their target market. Often, this was based on accessibility considerations.
• Structured engagement with distributors: Manufacturers should maintain structured, evidence-based engagement with distributors so they can assess whether products are being distributed appropriately and if customers are receiving good outcomes. The FCA refers to the investment management sector that has collectively developed a Distributor Feedback Template to aid reporting arrangements within distribution chains.
• Intervening on out-of-target market distribution: The FCA found good examples of firms that: identified out-of-target market sales through monitoring or reviews; investigated the underlying cause; implemented remedial actions; and monitored outcomes post remediation to confirm the intervention worked. Examples given include where a firm identified a referral scheme that had resulted in the acquisition of customers who were then not using their account. The firm ceased the original scheme and relaunched a new scheme which was more focused on active usage of the product. This resulted in the acquisition of more engaged customers who – as they were actively using and benefiting from the product – were more likely to be in their target market.

Areas for Improvement

• Limited evidence to justify distribution strategy: Many firms provided limited rationales for their distribution strategies, some giving overly generic explanations. Others explained how they performed due diligence on third-party distributors to make sure they met legal and regulatory requirements, but they didn’t then fully explain how they were assured that the distribution channels used by those firms were appropriate for the target market.
• Measuring impact of changes to distribution strategy: Although firms identified instances of products and services sold outside the target market and took action to rectify the issue, they couldn’t always evidence how they had measured the impact of their interventions to ensure they were effective.

FCA's Overall Message

The FCA continues to focus on evidence-based customer outcomes management. It expects firms to demonstrate not merely that they have governance frameworks in place, but that they understand customer needs, identify emerging harms early, and can evidence that interventions result in better customer outcomes. Firms should review the FCA’s findings against their own approach and identify possible improvements.