The FCA found that the design of some digital loan processes lacks positive friction and excludes information consumers need, for example, on cost.
Lenders' online and in-app application processes can help prospective borrowers understand what they’re signing up for, a review by the 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
- Digital design in customers' online journeys: good practice and areas for improvement[2]
- Research Note: Consumer impact of sludge, deceptive design, timeliness and simplification[3].
- 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 (PDF)[4] has tested positive frictions in the form of check boxes, time delays and requirements for evidence declaration in the context of high-risk investing.
- The findings of this review relate to consumer credit providers only, but there is good and poor practice that might be of interest more broadly to those firms with a digital presence.
- We've made various changes in the consumer credit sector[5] in recent years.
- In 2022, the FCA published research into how trading apps were allowing sludge and gamification practices[6].
- The FCA's Financial Lives 2024 survey[7] found that digital exclusion in the UK has significantly declined in recent years. In May 2024, only 2% of adults (1.2 million) 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.