Research with 2000 UK adults, released today shows that banking customers are feeling alone and confused about their finances at a time of economic uncertainty for many. The research commissioned by experience services business – Foolproof, a Zensar company, demonstrates the need for the FCA’s Consumer Duty principle which was/will be implemented last/next week.
Off the back of this research, Foolproof financial services experts encourage banks and financial providers to consider the term ‘vulnerable customer’ carefully and urges them to ensure they are offering services that are clearly worded, informative and supportive. The firm believes that the combination of lack of financial comprehension and the continued squeeze on household incomes may see many previously solvent Brits in danger of falling into the ‘vulnerable’ category.
The Consumer Duty rules indicate that firms should equip customers with “the right information to make effective, timely, and properly informed decisions.” This is one of a few outcomes where banks are perceived to be falling short according to Foolproof’s research which showed:
Perceived lack of support from banks: 58% of customers are unsure if, or do not feel, that their bank is supportive. This could be related to issues with customer service, lack of personalised assistance or inadequate communication. Banks must work to improve their customer support and engagement to build stronger relationships with their customers.
Difficulty understanding Terms and Conditions: 1 in 4 customers find it hard to understand the terms and conditions of their banking products. This highlights the need for banks and other financial providers to simplify their T&Cs and use more accessible language to improve transparency and customer comprehension, particularly in relation to big ticket items like loans, mortgages and other credit products.
Lack of clarity in financial language: 20% of customers do not understand the language used to describe financial products. Banks should make an effort to communicate in plain language, avoid jargon, and provide educational resources to help customers better understand financial terminology and what might best serve their needs.
Limited support for vulnerable people: 18% of customers think banks do not do a job of serving vulnerable, elderly or disabled customers. This indicates an awareness of an underserved group and that more could be done through accessible technologies and designing for all rather than the average experience.
Need for improved financial literacy: Almost half (44%) of customers believe that banks could do more to help them understand their money better. This underscores the importance of financial education initiatives by banks to empower customers with the knowledge and tools to make informed financial decisions and to grow their wealth.
Low customer trust in banks to provide help needed: 26% of customers believe banks do not care about helping customers come out of debt and believe that it is in their interest not to. This could indicate a brand perception problem and one that needs addressing through clear communication and increased support of vulnerable or indebted customers.
Anup Rege, Chief Business Officer, Foolproof, a Zensar company said: “Consumer Duty talks much about protecting vulnerable customers. However the term vulnerable, with regards to finance, has the danger of being misconstrued as being a smaller group of people than could actually be the case. Anyone seriously worried about their finances should be considered in this category and financial services businesses will need to think about what services can be created to support them. The spirit of Consumer Duty is in embodying that lives change and that some financial products stay with people across significant changes in their life, and this broader definition is incredibly important in the present moment.
Addressing these concerns and aligning with customer needs will be a priority for banks as Consumer Duty regulations come into effect combined with a financial environment that many aren’t used to living in. By improving transparency, simplifying language, enhancing customer support, and investing in financial literacy programs, banks can build stronger relationships with their customers and provide better, more personalised services that will pay back these short-term investments in the long term many times over.
That said, whilst Consumer Duty is welcomed in terms of providing more transparency, it will only really help existing customers. To address the needs of the unbanked population, additional targeted initiatives and policies are required. These may include efforts to improve financial literacy and digital access, expanding access to basic banking services through community banks or credit unions, and fostering the development of more inclusive financial products designed for those with limited resources and financial experience.”