Protecting Vulnerable Customers in a Digital Age

The financial services industry is transforming through technology trends such as mobile banking solutions, AI and machine learning, and Big Data. The convenience and potential to offer services at scale through such technologies can help firms provide products and services to a wider range of customers. These developments can enable customers who might face challenges in interacting with banks through conventional means to more easily access financial services.

However, these changes can increase the likelihood of some other customers experiencing poor outcomes, particularly those with vulnerabilities.

Fortunately, there are ways in which banks can overcome these challenges and in fact use digital technologies to better protect customers using non-digital channels.

Protecting vulnerable customers…

A ‘vulnerable customer’ is “someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.[1]

Factors that warrant consideration for identifying customer vulnerability, outlined in the FCA’s ‘Approach to Consumers’, include:

• Health: health conditions or illnesses that affect ability to carry out day to day tasks. 5% of UK adults say their ability to carry out day to day tasks is reduced a lot by health conditions or illness.
• Resilience: low ability to withstand financial or emotional shocks. 30% of UK adults have been identified as having low financial resilience.
• Life Events: major life events such as bereavement or relationship breakdown. 19% of consumers say a major life event has happened to them or their partner in the last 12 months.
• Capability: low knowledge of financial matters or low confidence in managing money. 17% of UK adults have low financial capability.[2]

Organisations have taken steps to identify and protect customers in conventional channels. For example, via specialist training to staff to identify different customers’ wants, needs and vulnerabilities.

…in a digital age

However, it is important to ensure customers receive similar levels of protection as new digital offerings are developed. This is reinforced through comments from financial supervisors such as the FCA reiterating that they are ‘channel agnostic’.[3]

This consideration is complicated by two phenomena which lead to a lack of awareness around potential detriment to vulnerable customers. Firstly, it is easy to make an assumption that disruptive technology developments are clearly to the benefit of all customers since they are ‘more advanced’ and popular, as demonstrated by their adoption by consumers. However, a ‘move fast and break things’ mentality can often lead to blind spots; changes can go too far, too fast and with too few people engaged to fully understand the potential harm they can cause to customers. Secondly, technology development is often focused on ‘Minimum Viable Products’, with less common scenarios de-prioritised for later work. Vulnerable customers can fall down this gap and be exposed to bad outcomes.

How do organisations align the benefits of digital trends with protecting vulnerable customers from associated risks?

There is no silver bullet to overcome these challenges. However, there are several mitigating strategies which we suggest are deployed, in combination, to mitigate the risk of bad outcomes for customers through both digital and conventional offerings.

Overcoming challenges…

There are steps that firms can take to mitigate the risk of customer detriment through digital offerings:

• Holistic Design: The design of new products and customer journeys should consider vulnerable customers from inception. Training to increase awareness of vulnerabilities and diversity of backgrounds within design and review teams can help mitigate the risk of such considerations being forgotten during developm
• Identification: Whilst new products and customer journeys are in operation, the use of advanced analytics techniques such as behavioural analytics utilising Big Data can help better identify vulnerable customers earlier. For instance, monitoring of customer interaction with digital platforms might identify that some customers appear more hesitant or impulsive than others and such behaviours might be an indicator of a customer who is distressed.
• Hand-offs to Human: There will be some circumstances, such as the example above, where human interaction might lead to a better outcome for customers than continuing through a digital journey. Specialists with deep knowledge of customer vulnerabilities can potentially better support people through their journey.

…and offering better protection

There are also ways in which new technologies can reduce the likelihood of bad outcomes within or compared to more established ways in which customers interact with banks:

• Enhanced Controls and Features: Identifying and blocking certain types of transactions could be beneficial to some customers. Some challenger banks, for instance, have developed features which (once activated by customers) automatically block transactions related to gambling. Firms could also help build resilience for those with variable incomes through using analytics to suggest opportunities for customers to pay their most expensive debts or save money as and when their income is temporarily higher.
• Enhanced Monitoring: Traditionally, sales monitoring has been limited to sampling approaches due to the human effort required to review that expected standards are being met. The combination of technologies which enable monitoring of customer behaviours throughout digital journeys, and the application of voice recognition and natural language programming to recordings of conversations with customers can increase the scope of sales monitoring. This can help organisations better identify individual cases of customer vulnerability not being detected and find themes that feed wider improvements.
• Tools to Support Employees: There are situations in which customer-facing employees, keen to help customers, hear an indicator of one type of vulnerability and, whilst looking up resources to support them, miss signs of additional vulnerabilities. Firms could combine, voice recognition, natural language programming and analytics over Big Data to provide prompts to employees to support them in listening for signs of vulnerability.

Conclusion

Often discussions around the impact of technology on financial services can be characterised by polarisation between apparent irrepressible optimism from advocates for new developments and Luddite scepticism from others. Whilst simple, neither of these perspectives offer the full truth. Industry players who are able to combine and moderate these two outlooks can in fact both mitigate risks for vulnerable customers in digital interactions and indeed even improve protection in more established ways for customers to interface with banks.

[1] https://www.fca.org.uk/publication/occasional-papers/occasional-paper-8-exec-summary.pdf

[2] https://www.fca.org.uk/publication/corporate/approach-to-consumers.pdf

[3] https://www.ukfinance.org.uk/news-and-insight/blogs/conduct-risk-considerations-digital-innovators