This week marks a year since the Financial Conduct Authority (FCA) issued guidance to financial institutions for the fair treatment of vulnerable customers. The aim of the guidance is to encourage banks and building societies to better understand the needs of vulnerable customers so that they can better serve them.
Ahead of the anniversary, we conducted research for an up to date picture of how prevalent financial fraud is in the UK, and the results were very concerning. Of the 2,000 people surveyed, 22% said they have been tricked out of money at some point during their lives – that’s more than 1 in 5 of us.
On average, they lost £1,002 each, and this rises to £1,523 for people who have a carer – suggesting a relationship between vulnerability and a higher susceptibility to financial fraud. Dispelling the myth that only older people are targeted, the age group that lost the most money was those aged 25-34 who were duped out of £1,355. Losses of£10,000 or greater were experienced by 3% of all respondents – a life changing sum for most people.
The public health need for coronavirus restrictions accelerated the transition to digital across most industries – but with it came an increase in the number of opportunistic scammers, especially as many people were using online banking and shopping services for the first time. Around 41% of the people we surveyed said they had been targeted by a scam since March 2020.
The mental, physical and financial hardships endured during the pandemic, and the cost of living crisis amplified by recent geopolitical risks in Europe have hit living standards. The impact of these events will continue to take their toll with the number of people experiencing financial vulnerability likely to increase. Two in five (21%) of our respondents self-identified as financially vulnerable and 17% said they don’t think through financial decisions as well as they did before the pandemic.
Despite the FCA guidance, financial vulnerability has increased, and under current circumstances, it looks set to rise further. The need to tackle financial vulnerability is more pressing now than ever, but to truly achieve this, we need a multisector, multidisciplinary and multi skills approach. Industries, including finance, technology and healthcare, need to come together to improve the way we detect the characteristics and drivers of vulnerability so that we financial institutions are equipped to intervene before it’s too late.