Tailored Support Requires Digital Urgency

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Who would have thought a Downing Street plan to renovate a flat would cause so much outrage? As the court of “Boris the 8th” deals with the the fallout from a £200k fashion upgrade we have been struck by a surprising twist in the tale. It is increasingly clear that the UK public has focused its disgust on Carrie Antoinette’s disdain for John Lewis furniture rather than the dubious finances involved in the project. Why the fashion fury and the funding ambivalence? Actually, there are about 28 million reasons why the public were more likely to forgive money trouble.

The brutal truth is that there are a huge number of UK citizens sharing a similar money experience with their Prime Minister – financial distress

The Financial Conduct Authority (FCA) published data in February which found that the Covid-19 pandemic had massively increased the number of vulnerable adults in the UK. By late 2020 the number of vulnerable adults had grown from 3.7 million to 27.7 million.

Economic shock therapy administered by government and the Bank of England through the pandemic provided a mix of income support, payment holidays, business credit and lowered interest rates. However, the rapid vaccine roll-out means economic normality, even reality, is not far away. It also means state income supports and credit payment holidays will be reduced, or removed. Furthermore, despite government claims of “taking back control”, the following headlines suggest some economic trends are very much outside Downing Street control….

  • European financial supervisor warns of ‘tsunami’ of insolvencies –  Financial Times
  • Inflation replaces Coronavirus as top investment risk for fund managers – Bank of America
  • Brexit prompts 7,500 City jobs, $1.6 trillion to leave UK – Bloomberg

There is little doubt that despite the broader economic recovery from the global pandemic there is a financial ‘reality check’ facing many individuals and businesses. The UK is already a highly leveraged society so the recent cautionary guidance from the FCA to lenders is equally applicable to other service providers who operate with customer credit agreements.  Credit providers are obliged to offer ‘tailored support’ which is fair and appropriate for the customer. The penalties imposed by regulators for poor tailored support processes are likely to be significant and recent FCA action is likely to focus management minds:

December 2020: Financial Conduct Authority(FCA) fines Barclays Bank £26 million for failures in relation to their treatment of consumer credit customers who fell into arrears or experienced financial difficulties. The number of vulnerable customers involved was 1.5 million and Barclays had already paid back £273 million to those customers in their own redress programme!

June 2020: Lloyds Bank was fined £64 million by the FCA over the treatment of 526,000 mortgage customers in arrears between 2011 and 2015. In that instance, these customers had already received £300 miilion from Lloyds as compensation.

February 2020: Leading UK car finance company and subsidiary of Provident Financial, Moneybarn Limited, was fined £2.8 million by the FCA for the unfair treatment of 1,400 customers who could not keep up with their loan repayments while experiencing financial trouble. In addition to the fine, Moneybarn paid £30 million in redress to these vulnerable customers.

The combined financial cost to the firms above was well over £600 million when one includes the redress sums paid. Clearly, the risks involved in dealing with vulnerable customers are substantial.

Customer engagements which carry most risk are those where processes have not been updated for a post-pandemic vulnerable world. The sheer volume of cases coming down the tracks will present their own pressures but companies need to address other areas of potential friction. There is a real danger of wasted time and money if customer engagement processes lack thought or resources in the following areas:

  • Customer contact – method(email vs call) and timing of contact
  • Automation and self-service options for payments
  • Flexibility – providing menus of payment options, plans, alerts etc
  • Support options – from specialist internal teams or 3rd parties

In our previous “Pump Up Digital Transformation” article we specifically referred to the digital gaps in transformation projects and the potential waste of up to 50% of spend. Collections and tailored support are classic examples of how a smart deployment of technology can significantly help customers in a more sensitive manner and mitigate regulatory risk. Furthermore, we wrote of reducing friction by working with the existing “frame” of legacy platforms as many companies can’t simply “rip and replace” existing architecture.

Companies can take a pragmatic approach and augment their engagement capabilities with digitised solutions like our Which50 platform which connects seamlessly with core legacy platforms and databases. Improved customer experiences can be delivered in weeks, not months. Note also this is a low cost solution and then check out our graphic below of what is NOT working….

The positioning of Collections and Complaints beside each other in the graphic is no accident. Any companies reading the latest FCA guidance will have been left in no doubt that complaints from ‘vulnerable customers’ will  be heavily scrutinized. A sensitive and technology-smart avoidance of friction with customers in the difficult months ahead could save a lot of pain and penalties.  That is a regulatory curtain call one would certainly wish to miss.

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