Vulnerable customers have become unlikely harbingers of change in the financial services world. Consumer Duty regulations first introduced in 2022 by the Financial Conduct Authority (FCA), have evolved in the last two years, and from July ‘24 now apply to all products and customers in the industry.
Nearly 50% of the UK’s adult population currently falls under the regulatory body’s broad definition of vulnerability.
The repercussions of the FCA’s Consumer Duty have been felt in other regulated industries in the UK. Ofwat, the water regulator, published its own guidelines in December 2023, setting minimum standards for customers who need extra help.
Further regulations followed in February of this year, with the introduction of a customer-focused licence condition.
Ofcom, the communications regulator, added its own guidelines in 2022.
In January 2024, the energy suppliers were reminded of their responsibilities to treat customers fairly when installing involuntary prepayment meters.
“The FCA is the leader on this… it captures quite a lot of organisations, but there are other regulators which are not waiting to be told what to do,” Michael Anderson, VP of client management at Davies, told CXM.
The cost-of-living crisis has increased price scrutiny of organisations operating within regulated markets (particularly energy providers), pushing them to take greater care of their vulnerable customers or risk public fallout in the court of popular opinion.
While it’s generally considered that utility firms, particularly water service providers, have embraced the customer experience challenge, some firms in the financial services sector are lagging behind.
“I’m noticing that because of Consumer Duty, people are going ‘oh my god!’ we have really taken our finger off the pulse in terms of just giving our customers what they need,” explained Lee Jones, growth director with CX consultancy Elev-8.
“Some organisations have never measured customer voice before! I’m seeing really big financial service organisations putting in for awards because they’ve just implemented ‘voice of the customer,’” he added.
Many businesses looking at FCA compliance issues are only at the beginning of the process. “I’m talking to another financial services organisation. They’re looking at a report that says that 30% of their customers are vulnerable, but they don’t know which customers are in that 30%,” explained Anderson.
The situation will have to change quickly. FCA deadlines mean there is a lot of noise around customer experience, service and outcomes. The regulator has already issued repeated warnings to financial service firms that they run a risk of hefty fines if they fail to proactively identify and address possible risks to their vulnerable customers.
“FCA is forcing the conversation. Organisations are moving away from tick box exercises. Now they’re moving actually towards enlightenment,” said Anderson.
The FCA has taken a proactive approach, warning insurance companies about easy annual renewals, while ‘no-brainers’ for customers, don’t necessarily result in the best customer outcome.
“When the FCA looked into it, they realised [insurance firms were] overcharging and you’ve got customers on a product that they don’t need to be on,” said Jones.
Taking care of vulnerable customers increasingly means firms need to adopt a different, more empathic approach to customer service. According to Alex Russell-Rutherford, senior CX consultant with Skewb, a business consultancy working in the utility sector, firms tend to forget that they are not the ‘biggest thing’ in their customer’s life, and they need to be more ‘in tune’ with clients.
For example, as billing day can be particularly distressing for vulnerable customers, firms could revisit how it can be handled, suggested Russell-Rutherford.
Anderson suggested that billing and payment processes should be clear, with flexible and accessible options. Businesses should also consider “implementing reminders for upcoming payments to prevent confusion”.
Identifying possible vulnerable customers presents its own challenges. Organisations need to consider the human element and go beyond simple tick-box exercises. Bringing a delicate touch to customer service interactions where a vulnerable customer has already been identified is essential, but difficult. It requires changing the frontline staff’s attitude and language, as well as adopting a more empathetic approach.
Skewb recently worked with a client to send field engineering staff on bereavement training, that educated staff on how to talk sensitively to customers.
When later faced with recently bereaved customers, engineers reported that they went from feeling they didn’t know how to navigate the interaction to simply “explaining it in a really calm way that is understood [by the customer], the first time around,” to prevent further stress.
“It’s not necessarily about what you say. It’s about your demeanour and using language [so] you don’t have to touch [the difficult topic],” Russell-Rutherford explained.
“You can just say, ‘I’m sorry. Don’t worry. I’m here to do this, we’ll let you know as soon as it’s done. You don’t need to worry about this’. Let’s take the stress away from this stressful element of your bigger thing,” he added.
Jo Mayes, customer service director at Business Stream, and a former winner of the CX Professional of the Year at the UK Customer Experience Awards, expanded on the need to develop soft skills among customer facing staff.
“Agents should never be expected to be experts around vulnerability, but rather to have the soft skills and support from their team leads to provide an appropriate and empathetic service based on the customers’ needs, where the customer feels heard without judgement,” said Mayes.
Technology has an increasingly important role to play to help firms identify when customers could be distressed or in a vulnerable state. According to Anderson, screen readers, voice recognition, sentiment analysis, and sign language transcription can help organisations connect more effectively with vulnerable customers.
Unsurprisingly, artificial intelligence tools also have a role to play, helping call agents to identify customers in distress through certain keywords or phrases. “There are undoubtedly huge opportunities to leverage technology across the customer experience field to deliver better outcomes,” commented Mayes.
However, for them to be implemented correctly, it goes back to understanding customer journeys, personas and challenges they’re facing.“Who are my vulnerable customers? What are the vulnerabilities they are potentially facing? And, what are the solutions?” Anderson said.