The FCA’s last Financial Lives Survey reported that in May 2022, 12.9 million UK adults had low financial resilience; an increase of 8.4% from 2021. There are expectations that the number will vastly increase when the next report is published later this year. Vulnerable customers, including the elderly, disabled, low-income earners and those with mental health issues, often face challenges and disadvantages when navigating financial services, and have in recent years been greatly underserved by the current setup and culture of the banking system.
With around 365 monetary financial institutions (MFIs) that are authorised to accept deposits in the UK, the banking sector plays a crucial role in supporting individuals and businesses alike.
Only in recent years has there been acknowledgement that the root cause for many of the financial challenges society faces are outcomes of the internal culture cultivated inside of these institutions that hold money, and more importantly the power to place that money where they please. Most of the time banks are led by outdated systems (and to be fair to these institutions, they have been working on modernising through partnerships with fintechs, slowly shifting internal mindsets around incentivisation and compensation, and updating their legacy technology).
To foster a positive change and create a customer-centric banking culture that better serves these vulnerable customers, banks must take proactive measures to create a healthier, more positive internal culture. This blog post outlines key steps that financial institutions can undertake to promote a more inclusive and supportive environment for all customers.
Emphasis on training and awareness
A fundamental aspect of transforming bank culture is to prioritise comprehensive training and awareness programs. These programs should focus on recognising and understanding the needs of vulnerable customers. Training sessions should cover issues like financial abuse, mental health, disability awareness and empathetic communication. By fostering a deeper understanding of the challenges faced by vulnerable customers, employees and internal advocates can provide more compassionate and personalised support.
Design inclusive products and services
Banks should revamp their product and service offerings to cater to the diverse needs of vulnerable customers. Simplified banking products with transparent terms can help customers make informed decisions. Additionally, digital accessibility should be a priority to ensure that all customers can access online services without obstacles especially with the constant decrease in physical banking locations. Collaborating with advocacy groups and consulting directly with vulnerable customers can offer valuable insights for developing tailored solutions.
Establish dedicated support teams
Creating dedicated support teams within banks who specialise in assisting vulnerable customers can significantly improve the overall banking experience. These teams can be equipped with the necessary knowledge and tools to address the specific challenges faced by vulnerable individuals. The teams' availability through various communication channels, such as phone, email, and in-branch assistance, will ensure customers have easy access to help when needed. Creating established teams educated on the nuances of the customer subsect will create a better outcome for everyone involved, all the whilst increasing trust from the customer towards the bank.
Foster an inclusive organisational culture
It starts from within – promoting an inclusive culture inside the bank is vital to creating a long- lasting change. Banks should develop diversity and inclusion policies that extend to both customers and employees. Encouraging employee resource groups that champion the interests of vulnerable customers can help in this regard. Moreover, incorporating diversity metrics into employee performance evaluations can further emphasise the bank's commitment to inclusivity.
Utilise technology for financial empowerment
Technology can play a significant role in empowering vulnerable customers and fostering a customer-centric culture. Mobile apps and online platforms can offer budgeting tools, spending insights and educational resources to help vulnerable customers manage their finances better. These technologies can be designed with user-friendly interfaces to cater to customers with varying degrees of digital literacy.
Strengthen collaboration with external organisations
To enhance the support network for vulnerable customers, banks must collaborate with external organisations and charities that specialise in assisting vulnerable individuals. By partnering with such organisations, banks can tap into their expertise, resources, and networks, thereby providing customers with comprehensive support beyond traditional banking services.
Transparency and accountability
Building trust is paramount in changing the banking culture. Banks should prioritise transparency in their operations, including fees, charges and terms. Clear communication with customers, especially regarding potential risks associated with financial products, is crucial. Moreover, banks should hold themselves accountable by seeking regular feedback from vulnerable customers and using that input to drive continuous improvement.
Transforming the banking culture to better serve vulnerable customers in the UK is a complex yet essential endeavour. By emphasising training, fostering inclusivity and leveraging technology, banks can create a more compassionate and supportive environment.
By proactively addressing the unique challenges faced by vulnerable individuals, financial institutions can build trust and loyalty, contributing to a more resilient and equitable banking landscape.
As banks evolve to meet the needs of the most vulnerable among us, they will undoubtedly make strides toward becoming beacons of positive change in the UK financial sector.
Kalgera, a London-based RegTech, is the first line of defence for financial institutions who want to actively support its most vulnerable customers. By helping the finance sector identify customer vulnerability through transactional data, Kalgera creates better outcomes for the customer and the financial institution itself.
We are committed to working with banks through several avenues to comply with the FCA's Consumer Duty Act. Kalgera’s state-of-the-art technology uses 11 parallel AI models to pinpoint vulnerability to financial abuse and low financial resilience with greater precision.