The economy has been hit hard by the Covid-19 pandemic and the lockdown has accelerated the move to digital. That means retail banks are having to swiftly change the way they operate, manage credit and deal with customers in financial distress.
Covid-19 has affected people who would never have expected to face financial hardship. Huge financial uncertainty – coupled for some with bereavement or the lasting effects of sickness – means banking customers are especially vulnerable right now.
At the beginning of the lockdown, banks acted promptly to help customers move to digital services and were quick to respond to increased demand. But at least most banks – incumbents as well as challengers – already had digital systems in place.
The human side of the fallout from Covid-19 means the whole financial sector – including banks – now have a responsibility to support those adversely affected by the crisis. That means retail staff need to be trained to deal with the new normal.
Customer service in banking
Staff now need to provide customer service through multiple different channels to meet changing customer expectations. This includes improved knowledge of cyber awareness and a greater understanding of serving vulnerable customers.
‘Vulnerability’ usually suggests specific problems such as, say, age-related cognitive decline. However, most retail bank customers only have a general understanding of financial services. That makes them potentially vulnerable when dealing with a bank – even before severe adverse shocks like Covid-19.
There are no fixed rules on how banks should treat each customer, but the regulator expects banks to take a principles-based approach. Those principles are to:
- act in the best interest of the customer
- look after customers’ assets responsibly
- not abuse customers’ trust in the bank
- deal with customers openly and honestly
- when things go wrong, investigate and put things right promptly if the bank was at fault
- do all it can to make sure that customers understand the products and services they have bought, and that those products are suitable and appropriate
- make sure customers understand the costs and charges of any products and services they buy
- deal sympathetically with customers when problems occur.
That’s not to say the customer’s always right. Banks are expected to reach decisions that are fair. Bank staff should use their best judgement and that means many need to upskill.
Retail banking staff and vulnerable customers
Customer-facing staff need to understand more than just the technical details of the products that the customer has, or might want.
They must get to the bottom of what the customer needs.
Teasing out all the relevant information can be difficult even in good times, but when people are in financial distress, it gets much harder.
Customers may be reluctant, for example, to fully disclose all the details of their personal circumstances.
The more data that the bank can gather in a “neutral” way, the easier any personal discussion should be. For example, a snapshot of the local economy can help put a customer’s position into perspective.
Banks’ responsibility to indebted customers
Covid-19 may be an economy-wide problem, but solving problem debt requires individual solutions. That means using data well to provide a differentiated service.
This issue was discussed in depth at the Westminster Business Forum’s Consumer Credit Conference in July.
Carlos Osorio, Director of Debt Recovery at TDX Group, suggested that using available data from open finance could become standard in collections and recovery.
However, he said, “We don’t need to wait for more data, more trends or for the regulators to do this stuff. A lot is about doing the right thing.”
Lenders should carefully analyse all data to get to know customers well. For example, it might not be clear that someone is using an overdraft to maintain access to a credit card.
At the same conference, Jaidev Janardana, CEO of Zopa, pointed out that open banking could help customers understand debt and credit. That, in turn, would lower vulnerability.
“Open banking could be huge enabler to help consumers make better choices,” Janardana said, “to really give transparency on the cost of credit.”
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