The FCA has warned that financial firms must demonstrate that customers understand the products they are being offered, not just that they have access to them.
The regulator says its focus is now on embedding “capability by design” under the Consumer Duty.
Speaking at the Fair4All Finance Delivering Financial Inclusion Together Conference, chief executive Nikhil Rathi said widening access to financial services without improving understanding risks “points of vulnerability where small decisions carry big consequences”.
Rathi said the UK has made progress on financial inclusion over the past decade, with basic banking, digital access and cash availability improving.
However, he warned that a gap has opened between access and capability, with many consumers still unable to navigate financial products confidently.
“Increased access alone does not guarantee successful outcomes. Financial capability must go hand in hand with inclusion,” he said.
Rathi highlighted FCA data showing that 67% of renters do not have contents insurance, one in ten adults are not confident spotting a scam and fewer than 15% of people with multiple debts prioritise paying down their highest-interest balance first.
He argued that firms should design products and customer journeys that build understanding upfront rather than treating education as an “add on”. That means clearer explanations at key decision points and better testing of customer comprehension.
The FCA will also review evidence on what works and convene firms, government and the Money and Pensions Service to drive more coordinated action.
Rathi said regulation will not block calculated risk-taking, adding: “People need to be able to make informed choices, not be prevented from making any choice at all.”
He stressed that under the Consumer Duty the focus extends to capability as well as fair value. “If we lift capability to match inclusion, more people save and invest with confidence and trust in the system grows,” he said.
