Almost two years ago as the Treasury Committee heard evidence in the Consumers’ Access to Financial Services enquiry, some surprise was expressed at the projected levels of potential vulnerability in the UK, sitting at nearly 50%. As we witness the fall-out from Covid-19, few would dispute those projections today.
Covid-19 has forced the issue of customer vulnerability up board agendas and thrown levels of preparedness into the spotlight. Unsurprisingly, the FCA is keen to harness lessons learned from the response to the crisis and the implications for the needs of vulnerable customers where services have shifted ever further online. Charles Randell, Chairman, speaking about the transition to increased digitalisation, warned those left behind would need continued support, “Advertising harmful products online is one of the huge challenges that the digitisation of financial services brings. Another is the risk of financial exclusion of people who are not online….When social distancing is over, we will see whether the move by many more consumers to contactless payment and online banking is permanent. If so, there are some communities and vulnerable consumers who will need continued support.” The FCA and the City of London Corporation have recently announced that they will collaborate on the pilot of a ‘digital sandbox’ to support innovative firms tackling challenges caused by the pandemic. In its pilot stage, the sandbox will focus on the detection and prevention of fraud and scams, supporting vulnerable customers, and improving access to finance for SMEs financially affected by the pandemic.
Amid the onset of Covid-19 and with 17% of UK households lacking fixed broadband,charities have worked hard to get people online. Many businesses were quick to rise to the challenge of supporting their vulnerable customers. The Government held talks with internet access providers over possible free broadband and data allowances were removed by the UK’s biggest broadband providers. As an army of volunteers came forward to help the vulnerable, concerns were voiced about the risk of fraud and coercion where people handed over debit cards and pin numbers. In response, the “Ask a friend for cash scheme” meant anyone who couldn’t leave their home could ask a trusted friend or volunteer to withdraw cash at any Post Office using a single-use voucher through a one-time barcode for a stipulated amount. Most major banks opened dedicated phone lines for their vulnerable customers and people could phone ahead and ask a friend to go to their bank with ID and again collect cash on their behalf.
As we look to the future post pandemic, attention will turn to the increasing number of opportunities that digitalisation of financial services can bring to supporting the vulnerable. While the journey has begun, much more can be done to simplify information, develop products specifically designed to their needs, add functionality and flexibility to tools, provide more options to personalise to individual needs and critically, facilitate third party access and support.
Much of the focus will centre on helping customers build financial resilience. Around a third of the UK adult population has savings of £250 or less. Focus will also fall on our growing ageing population. Just last week, the BBC reported on the “'Jaw-dropping' global crash in children being born” and the negative consequences of an inverted age structure. The latter was the focus of our report last year, “Our Future Financial Lives”, on the intergenerational impact of our ageing population.
Vulnerability comes in many forms and understanding vulnerability is the first critical step to being able to support and treat vulnerable customers fairly. Consumers need to associate disclosing a vulnerability with a positive outcome for them, rather than a restriction in offerings or a higher price. To make this work, the industry needs to continue to focus efforts on building consumer trust and confidence and being more proactive in flagging to customers how they can help those in vulnerable situations.
The FCA does not expect firms to develop new products solely for vulnerable customers, but it does want to see firms considering vulnerability in their target market and building this into the design of products and services. Where products already exist, firms are expected to assess how these can be tailored to meet the needs of vulnerable customers. This may include functionality to disclose more about their personal circumstances or simply request additional help. It is not always about using the term ‘vulnerable’. Many customers may not associate themselves with being “vulnerable” but they may still need extra support.
Digital banking is reshaping the way customers manage their finances and Big Data and improved data analytics means more opportunities to create more flexible products, such as on-demand insurance for possessions which can be switched on and off through a mobile device, making it affordable for one off needs. But much more can be done to provide greater accessibility for third party support, whether that be to help those without internet access, those with low literacy, numeracy and financial capability or those with physical impairments that make accessing online facilities more challenging. And more can be done to develop tools to help build people’s confidence in managing their money online and help people maintain their independence. A study by Age UK found that an older person in England and Wales becomes a victim of fraud every 40 seconds. Little wonder that the need for greater support in identifying fraud or financial abuse was one of the key needs highlighted in our report.
Firms should think about how customers with cognitive, dexterity, visual or audio issues will interact with systems. They should consider control options/frictions, nudge notifications and in-built delay systems for large transactions and key decisions to support customers in managing their finances. Firms need to consider the ability to provide flexible third party support systems that can enable view-only privileges through to tailored bespoke access that can limit what payments can be made by whom, where, for what and when, with the ability to switch rights on and off or amend remotely. These types of facilities would be a huge boon to the 6.5 million unpaid carers in the UK; a population that will reach 9 million by 2037.
Identifying indicators of vulnerability can be more challenging for firms that operate through digital channels. While this can be supported through the use of data analytics, at the same time firms need to consider privacy concerns and guard against the risk of reaching conclusions based on an erroneous set of assumptions. Firms should think about tracking how customers are interacting with technology in real time to identify pockets of customers that might be struggling (e.g. customers who suddenly stop using an App, failed log-on attempts, or repeat overwriting of data entries). Firms might also want to consider tracking how many contact points it takes a customer to reach a final step and how upgrades in software or hardware may affect customer access (e.g. where functionality changes, such as swipe controls).
Operational resilience is also key. All software has the potential to include its own vulnerabilities, so firms must plan carefully for the possibility of tech failing and online operations going down. How will vulnerable customers be contacted, and how will their needs be assessed, supported and prioritised? Does the firm know who their vulnerable customers are? What other ways will they have of accessing services or reporting problems and how will their third party support systems be made aware of such matters?
Lastly, it is important to remember that multi-channel access will always remain a priority. According to Age UK, even during the pandemic, more than half (53%) of older people have only used non digital banking methods in the last three months. Reports predict only a modest decline in bank branch visitors over the next 3-5 years, between 5-6%, and when it comes to the big financial decisions in life, around half the population prefer to meet face to face. So, while the financial services sector will continue to transform through digital technology, it will not render obsolete the personal touch.
This article was first published in Thomson Reuters on 29 July 2020.