How retail banks and insurers can support vulnerable customers.

In October 2020, the FCA announced there were 27.7 million adults with characteristics of vulnerability in the UK, a 15% increase from February 2020. For retail banks and insurers, this has led to the question of how financial services institutions can best support vulnerable customers.

Anyone can find themselves in vulnerable circumstances, such as losing a job or developing an illness. Consequently, people’s financial circumstances often change without warning.

Because vulnerable customers have additional or different needs, institutions like retail banks and insurers should support them by making their website, mobile apps, and other digital products simple and intuitive. They need to offer a standout user experience, as well as remove some of the red tape from their customer support processes.

Who is a vulnerable customer?

The FCA defines a vulnerable customer as someone who “due to their personal circumstances, is especially susceptible to harm, particularly when a [financial services] firm is not acting with appropriate levels of care.”

What are some examples and characteristics of vulnerable customers?

Vulnerability is a spectrum of risk that’s linked to four core drivers:

1. Health conditions such as physical disability, addiction or long-term illness
2. Life events like domestic abuse, bereavement or unemployment
3. Low resilience to deal with financial or emotional issues such as inadequate income or over-indebtedness
4. Limited capability and confidence in terms of managing money, literacy, numeracy or digital skills

For example, a person may be considered vulnerable if:

• They lose their job, raising stress levels and impacting their ability to pay the bills
• They’re unfamiliar with digital technology and find it hard to navigate online banking or insurance services to get the help they may need
• Their long-term relationship breaks down, leading to anxiety and distress

Vulnerable customers may also be more risk-tolerant, under increasing time pressures, or have reduced processing power and a lack of perspective. As a result, they may make poor financial decisions or mistakes that could have long term effects. For instance, they’re more likely to fall victim to a banking scam, purchase an inappropriate product, or make impulsive decisions under duress.

The situation is exacerbated if vulnerable customers receive sub-par support when navigating the world of banking or insurance.

How can the financial services industry help vulnerable customers?

Achieving good outcomes for vulnerable customers is all about understanding and responding to their needs. By empathising, retail banks and insurance companies can build tailored and effective solutions.

Retail banks and insurers should embed the fair treatment of vulnerable customers into their culture, policies and processes. That requires equipping staff with the right skills to understand:

• The nature and scale of vulnerability
• The impact of vulnerability

Only then can they grasp the needs of their customer base, recognise vulnerable customers, and respond effectively across areas such as product design, customer service and communications. Here, practical actions like building best-in-class UX and effective messaging come into play, as well as improving usability across all touch points, be it mobile, desktop or app.

If asked by the FCA, retail banks and insurance companies should be able to demonstrate how they’re ensuring the fair treatment of all customers, including vulnerable ones. As part of that, firms should monitor and assess whether outcomes for vulnerable consumers are as good as those for others.

Where they aren’t, improvements should be made.

Vulnerable customers and debt.

Let’s take debt as an example of vulnerability.

If a person owes money and by nature has low resilience, has experienced a recent bereavement, suffers from long-term illness, or has a learning difficulty, they may be considered vulnerable if those circumstances or characteristics make it harder to cope with the pressures of debt.

There are many additional reasons why someone may struggle to deal with debts. Meanwhile, others in a similar situation may manage fine.

If a creditor knows a customer is potentially vulnerable, they should take extra care to ensure that person receives fair treatment and isn’t put at a disadvantage because of their situation.

Although there’s no one-size-fits-all solution, there are options banks and insurers can consider to help vulnerable customers manage their debts, ranging from UX improvements to practical advice. These include:

• Harnessing the power of open banking and APIs to integrate debt advice and mental health resources into websites and apps, building a picture of a customer’s financial health and enabling tailored solutions
• Integrating a text box at the start of the consumer journey, so they can disclose financial information like debts without the potential embarrassment of in-branch communications
• Pattern recognition software to identify unusual financial activity
• Agreeing to a different way of dealing with a person’s debt that’s more appropriate to their needs, such as amending payment plans or amounts
• Suggesting the vulnerable customer gives a family member, friend or support worker the authority to discuss the case on their behalf
• Writing off a debt if the severity of the situation calls for it

Creating a vulnerable customer policy.

With more vulnerable customers than ever before, creating a comprehensive policy to support them is vital. The building blocks banks and insurers should consider include:

Grasping the nuances of vulnerability. Personal circumstances are the driver here. All customers are at risk, but that increases for people with vulnerability characteristics.

Spotting the signs. Because of its fluid nature, vulnerability requires customised and flexible responses from banks and insurers.

Vulnerability triggers. From health and resilience to life events, these impact people’s capabilities, potentially leading to vulnerability.

Meeting stakeholder needs. Address these at four levels:

1. Regulator expectations (the FCA in this case)
2. Customer wants and needs
3. What your employees want or deserve
4. Requirements by law

Awareness of potential pitfalls. These range from misunderstanding vulnerability and its impact to misapplying procedures and lack of interdepartmental alignment. Vulnerability can be recurring and each situation is unique to the specific customer. For example, the same illness can impact two people differently and for varying lengths of time, and may or may not leave them feeling vulnerable.

Taking the above into consideration, you can create your vulnerable customer policy. Set it in motion by auditing existing processes and updating them if necessary, as well as training staff. It’s also important to clearly articulate your vulnerable customer policy on your website and mobile app.

How can Quantum Metric help financial services institutions?

So, you’ve created your vulnerable customer policy and highlighted target areas such as improving the customer experience and reducing user friction. But how do you achieve those goals?

Enter Quantum Metric for financial services. Our session replay, behavioural metrics, anomaly detection and opportunity analysis help you understand how customers interact with your products and services. That knowledge arms you with empathy and drives better decision-making.

Alongside that, our mobile analytics help you improve the quality of your app, while our co-browsing tools allow you to engage with struggling customers in real-time. Quantum Metric’s tools also identify customer friction points, such as issues paying a bill.

Our insights quantify how many people are having the same problem and aggregate total impact. The quick diagnosis we offer enables you to:

• Prioritise opportunities and fixes in an economically sound way
• Create a more streamlined customer experience
• Say goodbye to overloaded call centres
• Minimise customers’ rage clicks

When it comes to customers’ data, we’re laser-focused on security and privacy. If sensitive information is captured for a valid business reason, it’s always encrypted at the device level.

Our product suite allows you to put yourself in the position of the customer, and think about how you would want and expect to be treated. Learn more about our customer-centric products.