The Financial Conduct Authority has now issued final guidance to clarify its expectations of financial firms on the fair treatment of vulnerable customers.
It is an important signal to those in financial services that helping those who need it most, is one of the most pressing priorities to be addressed in 2021.
The regulator’s own findings highlight the staggering number of people considered vulnerable; up 15 per cent in the last six months alone to 27.7m.
Given the ongoing impact of the Coronavirus pandemic, this number is likely to rise, so it is important that firms get this right.
The FCA notes: “The guidance being announced today will help ensure vulnerable consumers are treated fairly and achieve outcomes as good as other consumers.
"While some firms have made significant progress, we want to see all firms across sectors taking steps to understand and respond to the needs of their customers, particularly those who are most vulnerable to harm.”
It has become clear that financial companies have a responsibility to make vulnerable customers a priority and to exercise particular care when providing support to customers in vulnerable circumstances; the FCA’s guidance certainly supports this.
Fintech has huge potential to transform how financial companies serve and support customers, especially those now classed as vulnerable.
By design, fintechs are customer-centric problem solvers, using advanced technology, agility and versatility to serve customers and help the established financial services industry.
For example, at Gretel, we use cutting-edge technology to help financial services firms reconnect and reengage with their customers, particularly those classed as vulnerable.
While dormancy is seen across all types of customer demographic, there is, perhaps unsurprisingly, also a strong correlation between it and traditional measures of vulnerability, such as increasing age, bereavement or poor financial literacy.
Gretel has calculated that 19.6m people in the UK have become disconnected from financial services products and could be benefitting from a staggering £50bn in dormant or unclaimed money; not an insignificant sum and one that would be a welcome boost for so many people’s finances in 2021 and beyond.
Maintaining accurate and up-to-date personal data about customers is critical to both compliance with regulation and effective management of customer relationships, with the inability to do so presenting firms with potential exposure to a number of conduct and financial crime risks.
Siloed tactical approaches to management of the issue also do little to address the root cause, and as a consequence the problem has continued to escalate despite increasing regulation in this area.
There are two dimensions of change needed for financial services firms to better address customer vulnerability.
One is the culture of the organisation, ensuring the mindset from top to bottom within an organisation is aligned so that the protection of vulnerable customers is prioritised.
