Nadine Whittal, Data Solutions Specialist DataEQ
The Financial Conduct Authority (FCA) is upping the ante on Financial Services Providers (FSPs) to prevent harm against vulnerable consumers. As recently as October 2024, the FCA fined Volkswagen £5.4 million and ordered the company to compensate customers an additional £21.5 million for treating vulnerable customers unfairly. The FCA has mandated all financial service providers including banks, insurers and lenders to identify and respond appropriately to vulnerable consumers. The above case shows that to not do so is to risk significant financial penalties and lasting reputational damage.
This brings to the forefront the question of how the financial services sector should go about recognising and responding to consumers who fit the definition of vulnerability. Identifying vulnerable consumers presents a significant challenge, as consumers do not necessarily have a check box to identify themselves as vulnerable. Some may not even classify themselves as vulnerable. Therefore, understanding how vulnerable consumers behave or engage, and where they are speaking is critical to ensure the right response is provided to the customer, based on their specific profile.
Unstructured data sources such as social media, emails, and voice-to-text have, until recently, been an underutilised resource for consumer insight when analysed at scale. However, working with such data has traditionally posed challenges due to its complex nature. Social media exemplifies this, as the way people communicate on these platforms is often unfiltered and fragmented. Structuring this language into clear, definable themes has been complex, but recent advancements in Artificial Intelligence, large language models (LLMs), and crowd-sourcing techniques have gone a long way to addressing these challenges. As a result, unstructured data—particularly social media—can now be leveraged more effectively to provide insights into vulnerable customer experiences, enabling companies to better identify and serve these customers.
Findings from the 2024 DataEQ UK Banking Sentiment Index, an analysis of over 420,000 consumer posts towards UK banks from X and Trustpilot, revealed that different types of vulnerabilities often result in significant anxiety and challenges in communicating with banks. Among vulnerable consumers, 69% experienced social vulnerability, 14% economic vulnerability, 9% psychological vulnerability, and 8% physical vulnerability.
Elderly customers often struggled with digital systems, while clients with autism, anxiety, or ADHD frequently felt uncomfortable communicating through automated chatbots. Physically impaired individuals faced challenges in using call centres or visiting branches. As a result, vulnerable consumers or their associates often turned to social media to request support tailored to their specific needs.
Using this information, FSPs can investigate ways to make connecting with customer service teams accessible for the unique customer’s needs. This will also empower the vulnerable customer to take control over their financial lives.
Access to such data enables financial institutions to quickly identify and address issues in the vulnerable customer experience before customers—or their friends or relatives—feel compelled to involve the FCA. A common concern highlighted in the Volkswagen customer case as well as in the banking analysis\, was the lack of empathy from customer service agents and the absence of a clear, safe process to support recovery from financial loss. By leveraging insights from unstructured data sources, institutions can train staff to empathetically manage vulnerable customer expectations and develop processes that help these customers make informed, healthy financial decisions.
Support in selecting the appropriate product to suit the needs of the customer should also be considered. Vulnerable consumers are sometimes more easily led based on the nature of their vulnerability and as such can find themselves in possession of the incorrect financial service. Ensuring that staff are adequately trained to notice the easily influenced and are prepared to offer them suitable advice is important. For example, a person grieving the loss of a loved one may be mis-sold life insurance or funeral policies that are outside of their means to maintain. A case like this would entrench the customer in future financial difficulties. A similar situation faced TSB customers between June 2014 and March 2020. After the finalisation of investigations into allegations made against TSB, the bank was fined £10.9 million by the FCA for placing customers already in financial difficulty at risk of defaulting on payments.
Having a clear and focused strategy for managing and supporting vulnerable clients is key to ensuring financial institutions don’t fall prey to regulatory repercussions. This strategy needs to be informed by the unique experiences vulnerable customers face. Given the advances in data analysis and processing, unstructured data sources can be harnessed to provide a comprehensive source of information on the vulnerable customer. Thus, allowing financial institutions to tailor their strategies accordingly to better serve their customer base, while also limiting regulatory risk.