Lenders' online and in-app application
processes can help prospective borrowers understand what they're
signing up for, a review by the Financial Conduct Authority (FCA)
has found. However, improvements could be made to these digital
processes, so consumers are able to make informed decisions about
their finances.
The FCA's review is part of its
strategic focus on helping consumers navigate their financial
lives. It has shared examples of good and poor practice with
lenders to help them better support their
customers.
The regulator found some lenders were
using shorter, simplified language and providing explainer videos
that helped customer understanding.
However, the design of some digital
loan processes lacked ‘positive friction', which slows
decision-making, and excluded information consumers needed, for
example, on costs.
Alison Walters, Director of Consumer
Finance at the FCA, said: “Online and app-based applications can
make it easier for people to get the credit they need to navigate
their financial lives. But poorly designed applications could
mean people bypass important information. We're sharing examples
of what works and what doesn't, so lenders can better support
their customers.”
Notes to
editors
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Digital design in customers'
online journeys: good practice and areas for
improvement.
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Research Note: Consumer impact
of sludge, deceptive design, timeliness and
simplification.
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Positive frictions are sections of a
consumer journey that can encourage consumers to pause and
reflect, which can lead to better consumer outcomes. For
example, FCA research has tested
positive frictions in the form of check boxes, time delays and
requirements for evidence declaration in the context of
high-risk investing.
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The findings of this review relate
to consumer credit providers only, but are relevant to all
regulated firms with a digital presence.
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We've made various changes in the
consumer credit sector in recent years.
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In 2022, the FCA published research
into how trading apps were allowing sludge and gamification
practices.
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The FCA's Financial Lives 2024
survey found that digital exclusion in the UK has significantly
declined in recent years. In May 2024, only 2% of adults
(1.2million) were digitally excluded, a dramatic improvement
from 14% (6.9 million) in 2017. Digital exclusion includes
those who never or rarely use the internet, are unsure that
they use it, or have poor digital skills.
