This article was originally published in Business Day
By Nic Ray and Channon Perry
Providing fair and responsive service to customers on digital channels is no longer just a nice-to-have for SA banks. New market conduct regulations demand that banks deliver such outcomes. Failure to do so could lead to significant fines from the regulator and lasting reputational damage.
SA banks will have to adhere to the regulations stipulated in both the Financial Sector Conduct Authority’s (FSCA’s) banking conduct standard and the Conduct of Financial Institutions Bill. In addition to adapting to the changes to the market conduct landscape, banks will need to make significant improvements in how they deal with customers on social media as demand for digital services grows.
In July, the FSCA published the final banking conduct standard, based on the six treating customers fairly (TCF) outcomes. The regulator defines TCF as “an outcomes-based regulatory and supervisory approach designed to ensure that regulated financial institutions deliver specific, clearly set out fairness outcomes for financial customers”. TCF replaces the old tick-box approach to compliance in favour of one that prioritises fair outcomes for customers.
Banks are now required to demonstrate to the regulator that they deliver on, and can report on, the six TCF outcomes. This includes the banks’ behaviour and interactions with their customers on social media.
In the annual Banking Sentiment Index, released earlier in November, DataEQ categorised all of the banks’ social media complaints from the past year according to the six TCF outcomes to assess the banks’ conduct performance.
What emerged in the index is that social media is growing as a popular channel for consumers to engage with their banks, particularly among younger consumers, who find the asynchronous, text-based nature of the engagement convenient. In addition, Covid-19 has forced many more consumers, in some cases older and less digitally savvy, to adopt digital alternatives to physical branches and overwhelmed call centres.
As the pandemic wrought financial devastation, customers were contacting the banks in significant volumes for help on a range of issues, particularly relief programmes the banks were offering. As more consumers seek help this way, banks must ensure that their customer service teams are equipped to deal with the increase in requests and that they are resourced to identify and respond timeously.
The banks that are not equipped to do this will face significant customer dissatisfaction and high levels of cancellation threats. In the last year, for example, Discovery Bank had the lowest response rate, replying to about one in 10 of its most important customer interactions on Twitter. It’s no surprise then that Discovery Bank also had the highest share of cancellation threats as a share of its conversation. Of its customers who threatened to leave the bank, 76.7% cited its slow turnaround time.
In addition to improving fairness outcomes for customers, the FSCA’s banking conduct standard prescribes the establishment of a complaints management framework that includes, among other requirements, the categorisation of complaints made by customers.
Tens of thousands of these complaints are made on social media. In the last year alone 90.7% of them contained TCF themes. Some 47.3% of social media posts that required the banks’ attention and action went unanswered by the banks in the last year to boot.
The banks’ poor customer service performance was alarming for the regulator. Writing in the foreword to 2020’s Banking Sentiment Index, the FSCA’s Caroline Da Silva noted the regulator was “concerned with the volume of these complaints that DataEQ has identified”, adding that it was “crucial that banks monitor social media for these conversations.”
The high levels of unanswered complaints should come as a wake-up call to the banks who are missing out on considerable volumes of important customer interactions and are therefore unlikely to have been reporting on them for regulatory purposes. As such, they risk facing heavy fines from the regulator as well as the significant reputational risks that such sanctions would generate.
To grow and protect market share and adhere to outcome-based regulations, banks must prioritise social media as a channel for customer service. This requires banks to pay close attention to their online conversation and ensure they are equipped to identify, from within all of the noise, the conversation that requires attention and action. Doing this will improve outcomes for consumers, and in turn, mitigate the risk of churn, reputational damage, and sanction from the regulator.