Your bank might think you're vulnerable – and that should be OK

Transparent by design - Clearer paths through complex services help financial sector businesses protect more than just the most vulnerable customers.

Imagine a world where your financial well-being is everyone's priority, and where the safeguards are strongest for those who need them most.

This isn't just an ideal; it's the cornerstone of the Financial Conduct Authority's (FCA) Consumer Duty standards. These regulations are not about singling out vulnerability as a weakness, but recognising it as something many people experience, and an area for heightened support and protection.

That means defining what vulnerability looks like, and, for many institutions, identifying who those customers are.

The FCA works on the principle that adults are, on the whole, responsible for their own financial choices. So when you take out a £200k bank loan to build a luxury pool and spa in your back garden, it’s firmly on you to pay it back. 

But the regulator now also requires that institutions like banks and insurers help customers make informed decisions in order to avoid “causing foreseeable harm”. 

Vulnerable? Me?!

Who are these vulnerable people then? Surely not you or me? You might be surprised. 

The FCA says vulnerability can be “temporary, sporadic or permanent in nature”. It could be down to a disability or simply getting older, but vulnerability might also be triggered by changes in health or sudden events such as bereavement.

Most of us will, at some point, find ourselves in a situation where our capacity to cope with unanticipated financial challenges is compromised, or where we have a reduced ability to understand financial products or services.

In fact, the FCA’s own Financial Lives survey estimated that more than half of the UK population has one or more characteristics that might put them in this group. This includes nearly a quarter of UK adults who are classed as having ‘low financial resilience’ – they’re either already in financial distress, or are perilously close to it.

How can we identify vulnerable customers?

Tracking down individuals at risk within a financial institution’s customer base isn’t straightforward, and approaching them is equally fraught.

• A business can create an environment where customers are encouraged to voluntarily disclose their situation. Clear, compassionate communication that assures confidentiality, and outlines the benefits of disclosure, such as tailored support, can create the conditions for this kind of self-disclosure.

• Potential vulnerabilities can also be detected more subtly through feedback channels like carefully-worded surveys. In both cases, though, those ‘giving themselves away’ may be a self-selecting group of customers in more desperate situations.

• Employees can be trained to proactively spot the signs of vulnerability when they interact with customers – not just through talking to them, but in changes in financial behaviours. With the right systems in place, a staff member can flag patterns that might suggest stress, confusion or financial difficulty.

• Those patterns can also be detected directly using analytics tools and predictive models, identifying potential vulnerability through any unusual account activity or characteristics already known to the business.

But if most people are vulnerable…

Step back from the problem, though, and a bigger question comes into focus: should we be seeking to single out vulnerable people in the first place?

The Consumer Duty stipulates that “firms should be open and honest, avoid causing foreseeable harm, and support you to pursue your financial goals”.  

It precisely defines a vulnerable person as "someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care”. 

Rather than zooming in on who is or isn’t vulnerable, shouldn’t we foreground the second part of that definition? Are financial services being delivered in an “open and honest” way, and are providers “acting with appropriate levels of care”?

We’ve already seen that the majority of people will find themselves in the ‘vulnerable’ group at some point in their lives, and the FCA is right to expect firms to identify and tailor financial services to people who might be at increased risk.

But it seems counterintuitive to spend time and resources tracking down those customers, employing specialist staff, having awkward conversations, and creating multiple tailored user journeys to deal with them, when they potentially make up such a significant slice of their customer base.

Designing better services from the start

Instead, why not focus on delivering products, services and content that take the needs of those individuals into account from the start?

This week, the FCA shared examples of good practice they’ve already started seing in making user journeys more transparent. These included:

• Businesses adding ‘in the moment’ prompts and push notifications during the customer journey to let customers know about additional fees or charges.

• An insurance firm that has started highlighting policy exclusions on its website before customers start their application, so it’s clear up front.

• A bank which now clearly lists what’s included with its current account product, and an equally prominent list of what isn’t.

However, they also make clear there is still much to do – and that they won’t be backing down from enforcing the Consumer Duty.

We’ve often spoken about the value of human-centred design, services that are designed strategically from the outset to deliver for businesses, staff and customers. It’s now firmly not just a ‘nice-to-have’: it’s vital to meeting regulatory requirements. 

This can be hard to get right. We’re already helping our clients – including some major household names – better understand their responsibilities, and design services that do right by their customers.

Of course, there will always be a place for monitoring customer behaviour and ensuring those who are particularly vulnerable get the tailored support they need.

But making this the default isn’t a sustainable or cost-effective approach. Institutions that want to achieve lower costs, optimised processes and – crucially – higher customer trust and satisfaction, must invest in thoughtful, strategic design now and make their services better for everyone.