Complaints: stopping the next scandal

Alan Fahey is head of retail banking at DST

As 2015 begins to gather momentum, it looks like the end is finally in sight for PPI claims, according to the Financial Conduct Authority. Back in September, the FCA announced a further drop of 11% in complaints from the first half of 2014, continuing a downward trend that began back in 2012, writes Alan Fahey.

Any sustained reduction in complaints certainly comes as welcome news, but in truth, the banks are unlikely to celebrate. Complaints volumes may be dropping but the industry still faces significant unfinished business from the scandal. Even though the FCA’s thematic review of complaints handling noted that some improvements are already in evidence, it also identified significant weaknesses in firms’ ability to return fair and consistent outcomes for complainants.

The problem is that scandals like PPI are caused by two interlinking issues. The first is the mis-selling itself, but the second is the operating models that are currently being used, as these often make it difficult for firms to be confident of delivering the right outcomes for their customers. This is largely because such models are underpinned by important data which is poorly organised and difficult to retrieve from back office systems that aren’t integrated to the complaints management platform.

Any future mis-selling scandal is likely to reveal this same weakness in banks’ systems. With small volumes of complaints, banks’ current systems and processes can usually cope well enough to ensure that a compliant, consistent process is in place, but such a ‘tick box’ approach will not always deliver the right outcome for the customer.  Instead, the firm’s management team needs to ensure that treating customers fairly is at the heart of everything they do.

Treating customers fairly

In order to deliver on their promises consistently, banks not only need to define a control framework to ensure that tasks and activities are carried out in accordance with their compliance requirements, but they must also provide their customer service staff with solutions that facilitate information sharing and collaborative working.

The ideal situation is to adopt a personalised approach in which customers are treated as individuals and each case is weighed up carefully based on its particular merits. In this way a thorough understanding of each case becomes mandatory and banks will be able to establish the root cause of each complaint very quickly.

At the moment, processes are often too inflexible, however, with prescribed workflows and a tick box approach preventing customer service staff from engaging with customers and understanding the true nature of their complaints adequately. The lack of a case management approach, with a case owner who is able to define and assign tasks and activities for others to complete, means that complaints are often not effectively captured, investigated and resolved in a timely fashion.

The presence of multiple, poorly integrated systems also means that capturing, retaining and efficiently retrieving the information necessary to adjudicate claims is difficult. Ironically, a complaints management solution that requires such extensive data capture, or at least duplication of it, is likely to deliver a poor customer experience in itself, leading to new complaints that have nothing to do with the original problem at all. The challenge for firms, therefore, is in finding a balance between the volume of data needing to be captured and the delivery of a positive customer experience that still drives the best outcome for the customer.

Future scandals? 

Most complaint handling systems are still failing to provide banks with the tools they need  to identify the next potential scandal so they can stop it occurring – and, unfortunately, there is no shortage of candidates for what this might be.

At the end of last year, the FCA revealed that British banks are paying out more than £1 billion to small businesses that were mis-sold interest rate swaps.  Packaged accounts are also now the subject of an FCA probe. The Ombudsman’s latest figures have already shown that complaints about these products are on the rise, with complaints about packaged accounts in Q1-3 of 2014/15 already more than double the total for the previous year. The next scandal could be any of these – or something else altogether. Arguably, the real danger is the mis-selling practice that we’ve yet to hear about, and which could be dominating the headlines in a year or two.

The FCA’s thematic review underlined the fact that current systems often don’t support an effective operating model, especially where those initially capturing complaints and those actually dealing with them don’t operate from the same platform.  The resulting duplicated processes leading to repetitive and disjointed conversations are undesirable for both consumers and firms. These are the sort of practices that an effective complaint management solution should be helping banks to eradicate.

Moreover, by adopting efficient operational procedures that facilitate root cause analysis, firms can quickly improve their ability to identify the origin of problems, whether it’s product design, the sales process, or cultural issues. Only by identifying this root cause can the problem be addressed, and only by addressing it can banks foster genuine change and stop new scandals from impacting them.

The challenge that banks now face, therefore, is to create an empathetic, customer-centric environment, but without the cap-ex investment and resources that such an approach has historically required. It is in addressing the potential scandals of the future where banks can have the biggest impact right now, and where they should be starting to focus. If the banks can’t identify where those issues are likely to arise, it’s very probable that their complaints handling system is part of the problem.