Learning to safeguard vulnerable customers in a digital world
The Financial Conduct Authority (FCA) has never wavered on how it expects financial services institutions to treat vulnerable customers, and the COVID-19 pandemic only strengthened its resolve. Last summer, it issued fresh guidance on how to ensure positive outcomes for some 24 million people who, as the regulator puts it, “display one or more potential characteristics of vulnerability”.
What’s needed is an industry-wide effort to stamp out poor practice and make services more inclusive.
This is a sizeable figure and one that could grow if the economic impact of COVID-19 worsens. According to one BBC report, two million people deferred repayments on credit cards and loans at the height of the pandemic in spring – by October this had dropped substantially although there were still almost 162,000 agreements in place.
Clearly, the pandemic stress-tested even the most robust financial institutions, as call volumes and the number of defaults on personal debt increased. Not everyone who is in arrears is classed as vulnerable, but it’s well-known that those who suffer from mental illness, including addiction, are more susceptible (and vice-versa).
As well as finding cases of firms wilfully exploiting vulnerable people, the FCA also uncovered examples of customers’ vulnerability not being taken into account. What’s needed is an industry-wide effort to stamp out poor practice and make services more inclusive.
The question of whether fintech companies are better-placed to support the needs of vulnerable customers is an interesting one. Without branches, face-to-face contact and cheques, fintech banks and financial services have not tended to appeal to some groups, including vulnerable older people and those who lack digital skills and/or an internet connection.
But technology is agnostic and while it can certainly alienate some people, it is also a powerful way to support them if used in the right way.
Artificial intelligence (AI) is now widely seen as a way to identify vulnerable customers – for example, spotting patterns in behaviour and speech. It can also remove some of the biases associated with human decision-making, though also create them if the data is poor.
It might simply be that by deploying chatbots and self-serve functions for straightforward enquiries, call centre operatives have more time to deal with the complex cases.
There are other examples of challengers using technology to innovate before their high street rivals. Starling was the first bank to offer a self-exclusion function for gambling sites with Monzo following shortly afterwards, and both are said to be actively widening the age demographic of their customer base.
Whatever new initiatives they come up with, firms need to understand what impact their decision-making could have on vulnerable customers, and invest in the right training for staff.
Whether they’re a customer service adviser or data scientist, everyone must be up-to-date on the latest guidance and know how to put it into practice. Compliance with the Senior Managers and Certificated Regime (SMCR) is an important safeguard, since it helps to ensure that individuals are ‘fit and proper’ for the roles they undertake and those classed as ‘material risk takers’ do the right thing.
Digital learning and compliance technology enables firms to quickly and accurately identify knowledge gaps among individuals and departments, and proactively assign role-specific training content.
At a time when many workforces are remote, either temporarily due to lockdown or permanently as part of a firm’s remote-first policy, this technology ensures that nobody falls off the radar. Key metrics, including pass rate and number of Continuing Professional Development (CPD) training hours completed, can be easily tracked, while learners are able to access content at a time to suit them.
The onus is on training providers to deliver relevant and engaging materials that gives employees a genuine incentive to act responsibly. Without real-world examples, they could become detached from the current difficulties their customers might be facing. It’s not about ticking boxes but developing positive cultures that improve customer interactions.
Just as important as empowering staff to navigate complex customer cases is equipping them with the skills, knowledge and confidence to blow the whistle if they suspect wrongdoing, such as mis-selling to vulnerable people.
There is a strong commercial incentive for fintech firms to take the data they have so readily-available to capture under-served segments, or take market share from traditional providers. They should also be mindful of their Millennial and Gen-Z customers, who even if they’re not vulnerable themselves, would be quick to call out unethical behaviour.
It’ll be interesting to see what emerges from the Digital Sandbox pilot, which is addressing among other things, the role advanced analytics can play in improving services. This includes identifying customers who ‘may be in a vulnerable state, or about to transition to one’, scaling advice channels and managing lending risk in an unpredictable world.
We can expect a raft of new products and services from fintech firms over the coming months and years. As long as these innovations are underpinned by rigorous training on the latest regulations and guidance, they’ll set the tone for the entire financial services industry.
