They were initially insistent on using proper historical references, but at some point they just got sloppy. The 3D artists in the Art blog back in 2017 or thereabouts said that they didn't get given any references at all, and just winged it based on TV shows and video games they had played or watched, while I know for a fact that prior to that they had been using references. The reason I think they just got sloppy is because all the flavour text for factions still says what they're supposed to be based on. This is also why the quality and design of different outfits varies so much.
In warband I never had to play with circles above heads, while in Bannerlord I have to do it all the time, despite the colour uniformity. The problem is that the outfits are poorly designed. There is usually a patch of colour on the chest if you're lucky, but the rest is all brown. I can't quickly distinguish between an Empire outfit and a Khuzait one. Look at any screenshot and the overwhelming majority of a soldier's silhouette is brown. There is no distinct helmet shape I can look out for. The lighting doesn't help either.
Compare that to Warband where the outfits are all designed more or less cohesively.
Nords = chainmail
Vaegirs = Fur
Khergits = lamellar
Sarranids = Beige linen
Despite there being much fewer actual colours on an average outfit in warband, and the total lack of factional colours overall, I don't have to find their colour patch to know what faction they are in.