Three years on from the introduction of the Consumer Duty, the FCA’s supervisory messaging has moved into a more mature phase. The question is no longer whether firms have implemented Consumer Duty governance or built outcomes monitoring frameworks as for most firms, those foundations are now expected to be in place. The more important question is whether those arrangements are demonstrably improving customer outcomes.
On 10 July 2026, the FCA gave firms three separate opportunities to test that question at once. It published a new good and poor practice review on products and services, substantially rewrote its price and value publication (replacing the September 2024 version with new examples “reflecting insights from more recent work across multiple sectors”), and refreshed its consumer support publication with further smaller-firm examples added to the March 2025 original.
The timing is significant. Rather than releasing a single review in isolation, the FCA updated its suite of Consumer Duty outcomes publications on the same day, shortly after issuing Consultation Paper CP26/23, on proposed changes to the scope and proportionality of the Duty. Viewed individually, each publication provides useful insight into a specific outcome. Taken together, they offer a broader and more valuable picture of the FCA’s current expectations and supervisory focus.
Square 4’s recent Consumer Duty research supports this shift. It found that firms have made meaningful progress in building governance, accountability, data and oversight capability, but that implementation maturity and outcomes maturity are not always advancing at the same pace. The next phase of Consumer Duty is therefore likely to distinguish firms not by the existence of frameworks, but by how effectively they convert customer insight into operational and strategic action.
A More Targeted Duty
At first glance, CP26/23 reads as part of a broader shift towards greater regulatory simplification and proportionality. It proposes clarifying firms’ obligations in distribution chains, addressing overlap between the Duty and other product governance rules, and applying the Duty more closely to a firm’s ability to influence customer outcomes. It also reflects the FCA’s recognition that some firms, particularly those in wholesale markets or complex distribution chains, may have interpreted the Duty more broadly than originally intended.
The three publications refreshed on 10 July point in a different but complementary direction. Across products and services, price and value, and consumer support, the FCA’s expectations of good practice continue to evolve and mature. The FCA is no longer simply looking for evidence that governance arrangements exist or that management information is being collected. Instead, increasing emphasis is being placed on the quality of firms’ analysis, the effectiveness of actions taken in response to identified risks, and firms’ ability to demonstrate that those actions have led to improved customer outcomes.
The combined message is not that the Duty is becoming lighter. It is that firms should be more targeted and precise in determining where the Duty applies, while continuing to raise the standard of delivery in the areas that remain in scope. A more proportionate Duty does not equate to a lower bar. Instead, it points towards focusing resources on areas where firms can have the greatest impact on customer outcomes, rather than expending effort where their ability to influence outcomes is limited.
This is consistent with Square 4’s research findings. Firms continue to report high levels of confidence in their Consumer Duty arrangements, including improved data and MI visibility and more established outcomes monitoring frameworks. However, the same research highlights a persistent gap between internal confidence and external consumer perception, particularly in areas most closely linked to customer trust, such as acting in customers’ best interests, value for money and customer service.
From Issue Identification to Outcome Verification
A consistent theme runs through all three publications, and the FCA expresses it in similar language each time: firms are becoming more effective at identifying potential issues, but are far less effective at demonstrating what happens after those issues have been identified.
In Price and Value, the FCA’s message on mitigating action is explicit. Where a fair value concern is identified, firms should take targeted action and monitor whether that action has been successful in addressing the underlying issue. Firms making changes without assessing their effectiveness or impact on customer outcomes fell short of good practice.
In consumer support, the same gap emerges through a different lens. Many firms relied on transactional metrics, such as contact rates and wait times, rather than testing whether customers actually achieved good outcomes. Notably, 13% of firms surveyed reported carrying out no quality assurance of the support channels they provide.
In products and services, a similar pattern appears again. Firms could often demonstrate that a change had been made, whether introducing a self-service option, simplifying communications, or correcting an issue in distribution. However, they were less able to evidence that the change had delivered the intended improvement in customer outcomes, rather than simply being implemented.
This is where “closing the loop” becomes critical. Across all three outcomes, the FCA’s stronger examples go beyond identifying a risk or implementing a change. They include follow-up testing and monitoring to assess whether the intervention achieved the desired outcome. By contrast, weaker examples often showed firms identifying concerns but failing to demonstrate how those concerns were addressed, monitored, and ultimately resolved.
This reinforces a theme from Square 4’s Outcomes Monitoring Framework White Paper: outcomes monitoring should not end with issue identification. Firms need a clear, end-to-end process that links the identification of a customer outcome risk to the actions taken and, crucially, to evidence that those actions have resolved or mitigated the issue. Implementing an action alone is no longer sufficient; firms must be able to demonstrate that it has delivered a measurable improvement in customer outcomes.
This is also a central finding from Square 4’s Consumer Duty research: many firms have improved visibility of customer outcomes, but still find it harder to demonstrate that monitoring leads to timely management action, root cause analysis and measurable improvement. Common weaknesses include over-reliance on lagging indicators, limited explanation of causation, retrospective reporting and weak linkage between MI, remediation and business decisions.
With the FCA now conveying this message consistently across three separate Consumer Duty outcomes, the direction of travel is clear: regulatory expectations are shifting from issue management towards outcome verification.
Put simply, the FCA’s direction of travel mirrors the market evidence: firms are not being judged on whether they can identify issues, but on whether they can prove those issues have been understood, acted on and resolved.
Can Smaller Firms Keep Up?
Many of the good practice examples across all three publications are impressive, and drawn from firms with dedicated outcome testing teams, multi-profile segmentation models, and external design panels. For smaller regulated firms, that naturally raises a question: are they expected to build the same level of infrastructure?
The FCA’s own smaller-firm examples, repeated consistently across all three publications, suggest not. But proportionality, a principle that CP26/23 relies on heavily, cuts both ways. Smaller firms are not expected to match the sophistication of larger firms, but expectations must still reflect the risks posed by their products and services.
What the FCA values, even in its smaller-firm examples, is not the sophistication of the tools used, but the quality of the insight and evidence behind decisions. Firms that can show customer needs have genuinely influenced product design, communications and support arrangements are likely to meet expectations, regardless of how that insight was gathered. Complaints trends, frontline feedback and direct management involvement can all provide meaningful evidence of customer outcomes without the need for formal research panels or dedicated analytics teams.
The message for smaller firms isn’t to ‘do less’ or to try to match larger firms. Instead, it is about making better use of the insight already available within the business and being able to evidence how it informs decision-making. Proportionality is permission to be resourceful, not a licence to be unable to answer the outcomes question when it is asked.
The Square 4 research also supports this more proportionate interpretation. The firms most likely to benefit from Consumer Duty are not necessarily those with the most sophisticated infrastructure, but those that can use available insight effectively, define what good outcomes look like, and show how evidence influences decisions. The research found that the strongest commercial outcomes were reported by firms that invested early in data, analytics and customer insight capabilities, rather than relying primarily on proxy metrics and governance frameworks.
Distribution Chains: A Strong Message on Responsibilities
In a message that closely aligns with CP26/23, the Products and Services review makes clear that firms are not expected to oversee the overall compliance of every party in their distribution chain. Instead, their responsibility is to deliver and evidence good outcomes for their own customers, supported by appropriate oversight and effective information sharing with distributors and third parties. The Consumer Support publication reinforces this point, highlighting mixed progress among firms in obtaining meaningful management information from outsourced service providers.
Obtaining meaningful outcomes data from distributors, rather than simply confirming that a process has been followed, remains one of the most challenging aspects of Consumer Duty implementation. The FCA’s example of a smaller firm establishing clear data-sharing expectations from the outset is particularly instructive. It illustrates that effective oversight does not necessarily require extensive monitoring frameworks, but rather clarity on what information is needed, why it matters and how it will be used.
Again, the message is consistent: there is less emphasis on firms monitoring each other’s compliance, and greater emphasis on firms understanding, monitoring and evidencing outcomes for their own customers.
This remains a clear gap in market practice. Square 4’s research found that, while many firms have enhanced third-party oversight since Consumer Duty implementation, firms continue to face challenges in evidencing how third-party performance affects customer outcomes. Recurring weaknesses include inconsistent MI, limited visibility across customer journeys, weak escalation processes and insufficient evidence that firms understand how distribution chain activity translates into customer impact.
What Firms Should Be Doing Now
A few practical steps firms should consider, regardless of size:
- Don’t treat CP26/23 as a reason to pause. Use it as an opportunity to clarify where the Duty applies within your business, particularly your role in any distribution chain, while continuing to invest in customer outcomes within that scope. The scope may be narrowing but the standard is not.
- Build a ‘did it work?’ step into every change. When acting on monitoring insight, customer feedback or complaints themes, define upfront how success will be measured. Focus on the impact on customer outcomes, not simply whether the action was implemented. This is one of the most consistent themes across all three publications, and one of the most straightforward gaps to address.
- Re-test whether outcomes MI is genuinely decision-useful. Square 4’s research found that many firms have improved data visibility, but visibility alone is not enough. Firms should test whether MI explains causation, highlights emerging harm, supports challenge and enables management to evidence that action has improved outcomes.
- Rebalance investment towards customer experience capabilities. Square 4’s research found that investment has often been concentrated in governance, reporting, outcomes monitoring and training, while product and service design, customer support, communications and data capability can receive comparatively less focus. Those lower-investment areas are often the capabilities most directly linked to improved customer experience.
- Use external evidence as a challenge point. Firms should compare internal assurance with external customer indicators, including complaints, customer research, consumer testing and sector benchmarks. Square 4’s research highlights that the attributes most important to customer advocacy, including acting in customers’ best interests, value for money and customer service, remain comparatively weak and should prompt boards to test whether internal conclusions are sufficiently evidence-led.
- Check whether this gap has already been flagged internally. If your response to the products and services review was to treat the “evidence the impact” point as new, check whether it was raised after the price and value or consumer support publications, and what was done about it.
- Revisit your target market granularity. If the same description could apply across multiple products or services, it may not be specific enough to demonstrate a clear understanding of customer needs and characteristics.
- Be targeted in your oversight of third parties. Rather than creating broad monitoring programmes, establish clear, outcome-focused data-sharing requirements with distributors and outsourcing partners from the outset.
- Scale your approach to your business. Firms do not need the sophistication of the largest organisations, but they do need a credible, evidence-based explanation of how customer needs influence decision-making and how good outcomes are monitored, tested and delivered.
How Can Square 4 help?
We work with firms to assess, design and strengthen Consumer Duty arrangements that stand up to regulatory scrutiny. Drawing on our 2026 Consumer Duty research, our review of Consumer Duty Board Reports and our work on outcomes monitoring, products and services governance, MI and data quality, we help firms move beyond framework completeness towards evidence-led decision-making, stronger MI, clearer action-impact loops, more robust product and value governance, and more defensible oversight of customer outcomes across distribution chains.
For further insight, download our White Paper: Outcomes Monitoring: A Square 4 Practical Guide and our market research report, Consumer Duty in 2026: Compliance to Culture to Customer Advocacy. Together, these set out how firms can close the gap between Consumer Duty confidence and evidence, strengthen outcome verification, and build governance that demonstrates not only that issues are identified, but that customer outcomes are genuinely improving.
If you would like to discuss how we can support your business further, please get in touch at hello@square4.com.
Authors:
Maria Gasiorowska – Senior Consultant: mgasiorowska@square4.com
Alice Buckley – Consultant: abuckley@square4.com
