Competition between businesses is a force for positive change, but never when it comes at a cost to the consumer.
Today, that cost can come in many forms, from higher prices and unfavourable credit agreements, to poor customer experience and a failure to provide a duty of care. With more than 14 million people in the UK now categorised as having ‘low financial resilience’ and another 27 million showing signs of financial vulnerability, it’s never been more important for brands to exercise a duty of care when assessing their customers for credit.
Recently, the House of Lords Liaison Committee called on the UK government to introduce a new requirement for the Financial Conduct Authority (FCA) to establish a statutory duty of care that banks and other financial services providers must employ when dealing with customers. This will be welcomed by the FCA, which has been campaigning to redress the imbalance between consumers and other financial institutions for some time.
What legislation is the government being pressured to implement?
The new measures being called for are designed to add another layer of protection for consumers in the form of corporate responsibility. Currently, banks and financial services providers are required to treat their customers ‘fairly’, but the Committee has argued that’s not quite sufficient enough. The government is therefore being urged to impose a legal duty of care that prevents financial institutions from profiting from the vulnerability of consumers.
The new measures being called for are designed to add another layer of protection for consumers in the form of corporate responsibility. Currently, banks and financial services providers are required to treat their customers ‘fairly’, but the Committee has argued that’s not quite sufficient enough. The government is therefore being urged to impose a legal duty of care that prevents financial institutions from profiting from the vulnerability of consumers.
The undeniable role customer experience plays in affordability and debt management.
When it comes to providing a duty of care to customers, the right questions need to be asked and affordability needs to be correctly assessed. While these are things that businesses can add to the mix, either through their own choice or by submitting to legislation. The Committee, for instance, has welcomed the news that ‘buy now pay later’ products such as Klarna and Clearpay will now be regulated and they’re calling for it to be brought forward without delay. However, even outside of legislation there is a great deal more that businesses can already be doing to ensure their customers are well supported and are making good decisions.
Take financial inclusion for instance. For every person able to access financial services via an app on their smartphone like its second nature, there’s another person who doesn’t have access to that channel or is unsure of how to use it. If businesses press forward with digital transformation in a bid to cut costs and streamline their services for tech-savvy customers, what becomes of the demographics that find themselves excluded from the digital picture? This is ‘digital gap’ is something that banks are already working hard to rectify, with several UK banks and building societies pledging to cater for ‘cash customers’ in the coming years. The Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) have also laid out plans to push for legislation that protects access to cash, particularly for cash reliant vulnerable consumers.
“Millions of people rely on cash as they are not ready or able to take advantage of digital payments. However, rapid closures to the cash machine and bank branch networks in recent years mean that many of these consumers risk being abandoned by their banks.”
-Gareth Shaw, Head of Money at Which?
MoneySavingExpert.com founder, Martin Lewis, gave evidence to the Committee arguing for financial inclusion to be made a priority. He commented: “We need far more senior, powerful and invested government in financial inclusion. Because it is the bedrock of employment. It is the bedrock of being a consumer and, frankly, it is the bedrock of being a citizen.”
While businesses should absolutely be exploring multi-touchpoint experiences and ways to digitally streamline their services – particularly in a post-COVID world – this latest push for ‘duty of care’ legislation is the starkest reminder yet that brands should not be pursuing these changes at the cost of customer experience and inclusion.
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