The FCA’s paper Consumer understanding: Good practice and areas for improvement sets out how firms should strengthen communications under the Consumer Duty and is available at: https://www.fca.org.uk/publications/good-and-poor-practice/consumer-understanding-good-practice-areas-improvement.
The paper is important not because it creates new rules, but because it shows how conduct supervision is shifting from a narrow disclosure model toward an evidence-based consumer-understanding model.
The FCA states explicitly that the paper is intended to help firms improve consumer understanding under the Consumer Duty, and it organises good and poor practice around five operational themes: management information and testing, innovation and communications design, vulnerability and accessibility, financial promotions, and governance and oversight. It also makes clear that firms should use evidence such as complaints, chat transcripts, drop-off data, surveys, comprehension checks, and post-change testing to see where customers struggle and whether changes actually improve outcomes.
This is a more advanced conduct model than a traditional rule set focused mainly on giving information and obtaining client consent. The FCA’s approach assumes that a disclosure is not enough unless the firm can reasonably show that the intended customer group is likely to understand the communication, use it, and make informed decisions. In that sense, the paper is part of a broader regulatory movement toward customer outcomes, behavioural testing, and governance-backed conduct assurance, echoing global work on customer-centric consumer protection in both advanced and emerging economies. The World Bank has framed this broader shift in similar terms, distinguishing between provider–customer interactions and internal governance, and stressing board and senior management responsibility for customer-centric strategies, conduct oversight, and customer outcomes.
A comparison with emerging market conduct regulation shows that the FCA’s direction is not isolated. In Singapore, MAS’s fair dealing framework is explicitly built around “delivering fair dealing outcomes to customers” and, after its 2024 update, now applies across financial institutions and products, embedding outcomes on culture, suitability, information, and complaints handling. In GCC, Central Bank Consumer Protection Regulations generally are expressly principles-based, aims to protect consumers’ interests, promotes a culture of acting in consumers’ best interests, strengthens governance over the design, promotion and sale of products, and covers disclosure, market conduct, complaint handling, consumer education, and responsible financing. In South Africa, the FSCA has described its conduct approach as based on Treating Customers Fairly outcomes and proactive supervision aimed at pre-empting negative customer outcomes. Across many emerging markets, AFI and the World Bank also emphasise customer outcomes, digital conduct risks, and vulnerability-sensitive design in model frameworks for digital financial services.
So the regulatory trend is fairly clear. Mature and emerging conduct frameworks are converging around several ideas: customer outcomes rather than disclosure alone; governance and board ownership of conduct; better product oversight; vulnerability and accessibility; stronger promotion rules; and more data-led supervision. While many emerging market rulebooks still rely heavily on disclosure, suitability, and complaints requirements, they are gradually incorporating outcome language, governance expectations, and data use, drawing on global standards and peer examples.
FCA position and emerging market direction
The FCA paper places heavy weight on management information and testing as a core part of delivering the consumer understanding outcome under the Consumer Duty. Good practice includes using call listening, complaints, chat transcripts, website analytics, drop-off data, surveys, comprehension checks, A/B testing, callbacks, and documented links between insight and action. In emerging markets, authorities are increasingly encouraging or requiring firms to monitor conduct indicators such as complaint trends, error patterns, and digital-journey data, but few have yet articulated a comprehensive MI-and-testing framework focused on customer understanding similar to the FCA’s.
On communications and customer journeys, the FCA paper emphasizes design quality: layered disclosures, summaries, calculators, videos, walkthroughs, and testing of whether these tools genuinely help consumers. It also stresses plain language, clear structure, visual hierarchy, and channel consistency, including mobile and online environments. Emerging market policy models and guidelines—such as AFI’s Policy Model on Consumer Protection for Digital Financial Services and the World Bank’s customer-centric guidance—likewise call for customer-centric communication design, appropriate language, and the use of relevant digital tools, but practice is uneven and many frameworks still treat communication mainly as a matter of prescribed disclosures rather than tested design.
On vulnerability and accessibility, the FCA note is particularly advanced. It expects firms to identify needs early, tailor communications, test with vulnerable cohorts, use alternative formats, and monitor outcomes for vulnerable customers as a distinct management-information category. Emerging market approaches are moving in the same direction, especially where digital financial services have expanded access for low-income, rural, and first-time users, but specific vulnerability architectures—definitions, MI, and testing expectations—remain less developed, and authorities are often at an early stage of translating high-level vulnerability principles into operational requirements.
On governance and accountability, the FCA paper expects explicit senior management responsibility, regular MI review, cross-functional oversight, tracked actions, and decisions grounded in customer evidence, building on the FCA’s wider Consumer Duty board-report expectations. Emerging market frameworks are moving similarly: MAS’s fair dealing guidelines assign clear responsibilities to boards and senior management for delivering fair dealing outcomes, while many consumer-protection regulations in emerging markets embed institutional obligations, product-design oversight, and complaints governance as core expectations. The common direction of travel is toward boards and senior leaders owning conduct and customer outcomes, not only policy compliance.reedsmith+5
Recommended directions for emerging market conduct frameworks
The first recommended direction is to add explicit consumer understanding and customer outcomes provisions. Emerging market authorities could require firms, on a proportionate basis, to evidence that retail clients can understand key product terms, risks, fees, exclusions, liquidity constraints, leverage effects, and exit conditions, in line with customer-outcomes approaches.
The second direction is to introduce a formal conduct management-information and testing framework. Firms should be encouraged or required to monitor complaint themes, abandoned customer journeys, repeated customer contacts, chat and call confusion indicators, post-sale cancellation patterns, promotion click-through/drop-off data, and vulnerable-customer outcomes, and to connect these indicators to specific remediation actions. Supervisors in emerging markets could then use this MI for risk-based supervision, thematic work, and proportional expectations by product type and delivery channel.
The third direction is to strengthen communications design and financial-promotion rules. Authorities could require layered disclosures, plain language, key-facts summaries, prominent risk statements, and channel-consistent prominence across websites, apps, social media, and clear, relevant and timely information. They could also require pre-approval and post-launch review of promotions—at least for higher-risk or mass-market digital offers—including testing whether risks are as visible and understandable as product benefits, which is particularly relevant in rapidly digitalising emerging markets.
The fourth direction is to add explicit vulnerability and accessibility frameworks. Emerging market regulators should define relevant vulnerability characteristics for their contexts, require firms to identify customers with those characteristics, record communication needs, provide alternative formats, ensure assisted channels for low-digital-capability customers, and test communications with appropriate cohorts, reflecting FCA and MAS expectations. In markets with high levels of financial exclusion, low literacy, and multiple languages, this would be especially important for first-time digital finance users and low-income consumers.
The fifth direction is to embed product governance and controls more explicitly into conduct frameworks. This includes oversight over design, promotion and sale of products, and link product suitability and performance to fair dealing outcomes. Regulators could build on this by requiring target-market identification, product approval governance, periodic review, and escalation where complaints, arrears, or cancellations suggest foreseeable customer misunderstanding or harm, echoing product governance themes in TCF and Consumer Duty regimes.
The sixth direction is to strengthen board and senior-management accountability for conduct and customer outcomes. A practical way to do this is to introduce requirements or strong expectations around periodic board reporting or attestations covering customer understanding, complaints themes, vulnerable-customer outcomes, financial-promotion reviews, remedial actions, and material conduct incidents, similar in spirit to Consumer Duty board-report expectations. This would give supervisors a cleaner basis for thematic inspections, risk-based escalation, and constructive engagement with boards about how conduct and customer outcomes are governed in practice.
Overall assessment
The FCA paper is not merely a UK supervisory note; it is a useful signal of where conduct regulation is going globally, including in emerging markets. It shows a move from “did the firm disclose?” to “can the firm demonstrate that customers understood and could act on the disclosure?”
The priority is to translate this direction of travel into proportionate, context-sensitive rules and supervisory practices. This means adding explicit customer-understanding duties, vulnerability provisions, conduct MI and testing expectations, product-governance requirements, and clearer governance accountability, while tailoring expectations to market capacity, digitalisation levels, and financial inclusion objectives.
References
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