Letting Customer Voices Be Heard

The relationship between consumers and the businesses they engage with has shifted considerably since the advent of social media. We have seen consumer voices being amplified where a single tweet shared round the world can have a significant impact on a business’s reputation and bottom line. Combine this with a focus on consumer protection initiatives from regulators, and consumers are in a far stronger position than ever before when dealing with businesses.

In my experience, this is particularly true for consumer relationships with financial services firms. From a business perspective, the relationship might be purely transactional and functional. But financial circumstance has a huge impact on the way life is lived. As a link to someone’s financial wellbeing, regardless of whether good or bad service is received, this relationship with a provider in this sector can be an emotional one.

As such, the role financial services firms play in a customer’s wider wellbeing can be vital. It is this role that has led to such strong regulation of the industry. Particularly around initiatives of duty of care and treating customers fairly, with the upcoming Consumer Duty changing the rules again. These form a core part of the FCA’s focus and, as a result, the scales are now usually tipped in favour of the consumer.

Throughout 2020, many financial support initiatives were introduced by the government to see us through the pandemic. Yet with the fallout still coming in high inflation and energy prices, hundreds of thousands more individuals are now in extremely vulnerable circumstances. Their expectation is that their financial services providers will help them to navigate these challenging times.

This leads to a controversial question. How much risk and responsibility should the banks and other financial services organisations be asked to bear? Cynics would say they are private businesses with no wider obligations beyond the regulatory mandated requirements.

But many banks are keen to find ways to work with their customers on a personal level to support and grow that relationship and to recognise a wider sense of social responsibility.

Looking after customers is more than an obligation. I have come across the phrase “duty of care” a lot in my career, and in many different circumstances. It is a deceptively simple term that means many things to many people and has several legal and regulatory implications. But at its core, all interpretations are intended to convey the need to think beyond the basic transaction or event, and reasonably consider the consequences for the specific customer.

What “doing the right thing” for the customer means has seen a considerable shift over the last few years. This is unsurprising as the pandemic is leaving hundreds of thousands in vulnerable circumstances financially, health-wise, and emotionally.

The FCA’s Financial Lives Survey[1] revealed that as at October 2020, 53% of UK adults had characteristics of vulnerability. Vulnerable customers, in all their various forms, have long been a priority for financial services firms. But the sheer volume and variety of those struggling in today’s economy present a significant operational challenge.

This is a challenge that is not just about operations, it’s also about communication and talking a language that makes sense to those who don’t have detailed financial knowledge.

Misunderstanding the service comes up frequently as a root cause of complaints and the onus remains on the business to communicate in ways that the customer can understand. In all transactions with a financial services business, there is going to be an asymmetry of information where the organisation has more knowledge than the consumer.

The key for firms is how to effectively communicate this knowledge without jargon and complexity so that they can be sure that the customer fully understands what they are signing up for and agreeing to.

Miscommunication and lack of understanding have been the cause of multiple remediation cases over the years. At its most serious this is classified as mis-selling, with PPI the best-known example of the impact such lack of clarity can cause. The harm that PPI has done to both the sector’s reputation and ongoing consumer trust is still being felt. Firms have already started making headway in improving trust, with the Financial Lives Survey[2] revealing that in 2020 42% of adults had confidence in the sector, up from 38% in 2017.

If anything, the pandemic has provided the opportunity for the two sides to come closer together.