How to better serve financially vulnerable customers by orchestrating personalised digital onboarding journeys

Financially vulnerable customers and lenders

There is an active debate within consumer credit about the adequacy of digital-only customer journeys in lending. They meet customers’ demand for convenience and lenders’ need for efficiency. However, real concerns exist about their ability to adequately detect and mitigate risks faced by vulnerable customers.

The FCA defines vulnerable customers as people who, due to their personal circumstances, are especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care.  Financial vulnerability is on the rise.  The FCA’s Financial Lives survey presents figures, startling figures that 46% of UK adults display a characteristic that could make them vulnerable.

•  In the United Kingdom today, one in six working households—or 17.4%— live in poverty.
• 1.5 million consumers face water poverty.
• Over 20 million people are claiming state benefits.
• In England, at least 1 in 5 pupils (1.7 million) are eligible for free school meals.

The FCA Digital Sandbox Pilot

So, what are the limits of digital journeys, and when should we, humans, get involved?

This was the focus of PrinSIX’s involvement in the FCA’s Digital Sandbox pilot that took place in 2021. It aimed to consider how digital journeys can best deliver the outcomes articulated in the FCA’s FG21/1 Guidance for firms on the fair treatment of vulnerable customers, and the four categories of vulnerability – Financial Resilience, Competence, Life Events and Health.

Our findings made clear that customers require different onboarding channels depending on their needs and circumstances or, put another way, Financial Resilience is best assessed through digital journeys.

Personalising lending journeys help manage vulnerability challenges

Digital journeys and analytics are helpful in identifying elevated vulnerability risk in specific areas but identifying a high-risk vulnerable customer inevitably means an advisor will need to intervene.  Advisor interventions provide their own challenges.  Smart onboarding solutions know when to use technology, and when to escalate to a human advisor ‘as part of an onboarding journey.’

Simply moving online questions offline is ineffective, and the journey moves to a much more consultative environment; one that asks open questions, and delegates outcome decisions to advisors.

Learn more about our Customer Journey Orchestration solution ►

Other things to consider

While financial resilience may be best served digitally, it must be acknowledged that customers’ financial circumstances may flag broader vulnerability risks within the FCA’s other three definitions.  These are far more complex circumstances, which digital journeys cannot fully serve.

Other critical success factors include – nurturing the right company culture, adopting a leadership style that focuses on balancing customer and shareholder outcomes and adopting strategies to accommodate financially vulnerable customers by performing rigorous affordability checks.