Looking out for vulnerable consumers

Tanveer Qureshee at Zone argues that businesses must not fail in their duty of care toward disadvantaged customers

 

From recent headlines, it would be easy to conclude that large corporations are everything consumers feared – profit-hungry, single-minded and utterly careless of their needs.

 

The record-breaking profits of some utility providers in the UK during an energy price crisis coupled with their attempts to force vulnerable households to pay even higher rates for their energy needs was pretty much the nadir. The outcry when these facts became public was understandably forceful and the government stepped in to impose a crackdown on similar behaviour.

 

The uncomfortable implication remains – does it take government intervention to make big businesses behave with compassion?

 

Consumer protection regulation vs a duty of care

On one hand, consumer protection legislation is helpful in setting reasonable expectations that offer guidance through clear outcomes that the regulators can measure against. It also provides the often-needed boost for businesses to allocate budgets towards delivering these outcomes within the stipulated timelines.

 

On the other hand, companies need to realise that they both owe trusting consumers a duty of care and that it is quite simply good business sense. Industry-leading businesses have already recognised how closely customer-centricity is related to business performance. They successfully use it to their advantage and create differentiation for themselves in markets where there is no dearth of choice, by generating consumer loyalty through personalised offerings and support.

 

It is impossible to offer personalisation when you do not understand your consumers on a granular level, including the knowledge of where they might be vulnerable.

 

Protecting the interests of vulnerable consumers

What does it mean to be vulnerable? This can encompass anything from disability to neurodivergence or challenging living circumstances. These can all lead to an individual being financially vulnerable and more susceptible to foreseeable harm. In practice, consumer needs continually shift. They can move in and out of vulnerable circumstances at any stage.

 

In the energy example, it was particularly offensive to hear of vulnerable consumers being targeted. However, it’s easy to assume that this is still a small proportion of the overall consumer base. This is not the case. In their 2020 Financial Lives Survey, the Financial Conduct Authority (FCA) found that 46% of UK adults, 24 million people, show one or more characteristics of vulnerability.

 

The FCA has attempted to respond to this significant statistic and other indicators of the need for stronger consumer protection regulation within the financial services industry through the Consumer Duty Regulation, which comes into effect on 31^st July 2023. This will represent a major shift for financial services organisations. The regulation sets out rules mandating that consumers should receive communications they can understand, products and services that meet their needs and offer fair value, and they get the support they need, when they need it.

 

Financial services organisations can stand apart

To comply with the Duty, financial firms need to be attentive to changes in their customers’ circumstances, make it easy for them inform of these changes and to seek that extra help, if required.

 

By doing the basics properly, financial services companies can identify and understand the characteristics and profile of their target market, designing products and services with them in mind. This extends to communications as well, where firms need to understand that any content is purpose-driven, in an easy-to-digest format and sensitive to tone.

 

The customer journeys across channels also need to be examined. By using them to learn about customers, firms minimise their risk of missing key vulnerability touchpoints, respond accordingly and build much-needed trust. Even if part of the customer interaction means helping them leave, making it as easy as possible and avoiding the distasteful ‘sludge tactics’, is an important trust-builder.

 

Addressing the issue of vulnerability means there is an even greater imperative to examine omnichannel performance and make sure each element performs well alone and interacts seamlessly with the rest of the business.

 

Zone’s latest report, An Opportunity to be a Leader Through Customer-Centricity investigates the actions financial services firms need to take to prepare for the Consumer Duty regulation. The report also introduces an assessment framework that can be used to frame a firm’s challenges against consumer duty outcomes and turn them into actionable opportunities.

 

Some of today’s best-performing firms are also going to have to rethink their consumer relationships. Building trust, dissolving silos, maintaining a strong regime of consumer research and testing and applying user-centred content design are all going to be vital if financial services firms aren’t to find themselves on the wrong side of the regulation.

 

On the basis that some of the energy companies came close to achieving pariah status in the few short weeks it has taken for some of their actions to become public, financial services firms cannot afford to wait. While the regulation may take effect in July 2023, all eyes are already on how the financial services sector looks after their vulnerable consumers going forward.

 

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Tanveer Qureshee is Financial Services Solutions Lead at Zone

 

Main image courtesy of iStockPhoto.com