You’d use the character movement component for characters that’ll have typical movement mechanics with no funny business. It would suffice in most cases where you need it to handle ground movement, air movement, jumping, crouching, standing on surfaces, etc. but if your “characters” were cubes for example that are supposed to go in four directions on user input, they could as well just be pawns since they don’t need to utilize the movement component.
My explanation above is what would be considered while deciding whether to use the movement component (in other words deciding between using a character or a pawn class), not the design of the model. Because the movement component doesn’t use the mesh, it uses the capsule component.
Hope this helps! 