Insights ¦ Digital design for financial products and services: Consumer impact of sludge, deceptive design, timeliness and simplification

Published by: Financial Conduct Authority

Search for original: Link

Key Take Aways

1. Digital design practices significantly influence consumer understanding and decision-making in financial services.
2. Obscured information—where key facts are made less accessible—dampens product comprehension, particularly around product-specific knowledge.
3. Simplification and timely presentation of information enhance understanding of critical product features.
4. Techniques like clicking through menus or links to access information can diminish consumer comprehension.
5. The presentation of information does not directly impact behavioural outcomes such as accepting offers or borrowing amounts, suggesting a complex relationship between understanding and behaviour.
6. A higher level of financial literacy remains a primary driver in correctly understanding interest calculations, irrespective of design.
7. Features like ‘drip’ information, where details are revealed gradually, can improve understanding of certain elements but have limited effect on behaviour.
8. The experiment provides empirical evidence supporting the regulation focus on reducing sludge and deceptive design to protect consumers.
9. Poor information timing and complexity, even when unintentional, can act as barriers, undermining consumer decision-making.
10. The findings advocate for a strong emphasis on user interface design that supports clarity, accessibility, and transparency.
11. There is a recognised need for further research into how informed comprehension impacts real-world behaviours.
12. Regulatory expectations under the Consumer Duty include proactively addressing sludge practices and prioritising consumer understanding.

Key Statistics

• Participants who viewed information via navigation bar or hyperlink were about 13 and 11 percentage points less likely to understand loan repayments.
• Simplified information increased comprehension of repayments by up to 13 percentage points.
• Obscured information treatment reduced understanding of repayment mechanisms by approximately 50%.
• About 15% of responses were incomplete, with more than 60% dropping out at the application stage.
• In the control group, 26% of participants correctly understood repayment details; those exposed to Obscured Information performed worse than chance.
• Participants in the drip information treatment were 17% more likely to understand the borrowing amount.
• The only significant effect of presentation on willingness to accept was a 4.9 percentage point decrease in acceptance with drip information.
• The average requested borrowing amount in the control group was £345.33, with a difference of approximately £16.50 (~5%) under timely simplification.
• Correct interest payment calculations were primarily driven by financial literacy, with no significant treatment effects.
• Comprehension levels for understanding key product aspects remained low across treatments despite design interventions.
• The overall sample size was 6,045 after exclusions, with 63% female and an average age of 36 years.
• Dropout rates were low and evenly distributed, with attrition unlikely influenced by the treatments.

Key Discussion Points

• Effective digital design is crucial to align with the FCA’s Consumer Duty aiming to prevent unfair exploitation of biases and enhance consumer understanding.
• Obscured information practices, even if minor, can substantially impair consumers’ grasp of key product elements.
• Simplification and timely delivery of information bolsters consumers’ comprehension, underscoring the importance of user experience in financial decision-making.
• The lack of impact on behavioural outcomes suggests that comprehension alone does not predict consumer actions, warranting further exploration.
• The experimental data supports regulatory efforts to curb sludge and deceptive practices to protect consumers.
• Increases in comprehension through better design techniques do not automatically lead to significant behavioural shifts, highlighting a complex interplay.
• The experimental scenario’s artificial nature may underestimate real-world behavioural effects.
• Regulatory focus should extend beyond content to emphasise user interface strategies that promote clarity and accessibility.
• The research provides context-specific evidence that advancements in presentation can improve understanding but are insufficient alone to mitigate all risks.
• Further investigation is needed into how real-world behaviours are influenced by comprehension and whether interventions translate into better outcomes.
• The findings reinforce the regulator’s stance on scrutinising digital choice architecture within financial services.
• Overall, the article underscores the importance of strategic digital design to ensure consumers are well-informed and making decisions in their best interests.

Document Description

This article examines the impact of digital design practices on consumer understanding and behaviour in financial services. Drawing on empirical evidence from an experimental study, it explores how techniques such as obscuring information, simplifying content, and timing of information delivery influence product comprehension and decision-making. The article highlights regulatory implications under the FCA’s Consumer Duty, emphasising the importance of transparent, accessible user interfaces in safeguarding consumer interests and promoting fair market practices. It provides insights for senior managers on how design can be leveraged both to improve outcomes and to identify potential risks associated with sludge and deceptive patterns in digital financial environments.