The relentless drive towards digital engagement is fuelling an active debate within consumer credit about the adequacy of digital only customer journeys. They meet customers’ demand for convenience and lenders need for efficiency, but real concerns exist within the regulator and support charities that digital journeys fail to adequately detect and mitigate vulnerability risk. Are these concerns driven by a limited understanding of the digital world, or poor digital execution?
What are the limits of digital journeys, and when do humans need to get involved? This was the focus of PrinSIX’s involvement in the FCA’s Digital Sandbox pilot: 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)
The sandbox allowed us to speak to academics, charities, compliance specialists, regulators, and technologists to get a broad perspective of opinions. I should say, the views in this article are mine and should not be considered as representing the opinion of any other individual or organisation. They are nevertheless formed after some insightful conversations with experts.
In my opinion, neither view is right. Different customers require different onboarding channels depending on their needs and circumstances.
The opportunity of online digital conversations to uncover financial resilience
Financial Resilience is best assessed through digital journeys. Digital assessments are data driven, objective and evidence based. The challenge for lenders is whether these assessments are collecting and using the right data to assess an individual’s circumstances, adequately assessing very specific circumstances in a customer’s financial profile. This may be the point that digital journey limitations lead lenders to trigger human intervention. But do these interventions deliver good customer outcomes?
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. Digital journeys and analytics can be helpful in identifying elevated vulnerability risk in specific areas but identifying a high-risk customer inevitably means an advisor must intervene. Advisor interventions provide their own challenges. Simply moving online questions off-line is ineffective, and the journey moves to a more consultative environment: One that asks open questions, and delegates outcome decisions to advisors
Producing effective digital journeys, should not be hit and miss
It’s important to recognise the challenges lenders face when implementing effective advisor led journeys that reliably deliver good, consistent customer outcomes. Embarking on advisor led journeys evokes a whole new set of questions around training and competence frameworks, QA, management oversight and controls. The risk of ‘white noise’ is significant, where the really vulnerable get lost in the processing machine due to the volume of unnecessary referrals. To be effective, human intervention must be targeted, and focused on those at significant risk.
A combination of pure digital and hybrid journeys, if properly defined and executed, has the potential to deliver good outcomes for customers. It ensures that everyone’s objective of protecting the vulnerable is achieved.
The way forward
How in practical terms should digital and hybrid journeys work? When potential vulnerability is identified, what are effective mitigation strategies? How do we give lenders more tools than the obvious one – decline? Does ‘decline’ always deliver the best customer outcome?
The lack of answers within consumer credit to any of these questions is striking. While anecdotal examples exist, there is little best practice and there are only a handful of deployable, replicable strategies within a digital environment. The root causes of this are a lack of collaboration across stakeholders and an inability to run agile test and learn strategies within real lending environments quickly, safely and cost effectively.
Is there a solution?
My overall conclusion is that there needs to be a coming together of all stakeholders within consumer credit, working at developing proven, effective, practical, and measurable vulnerability strategies. This requires a fundamental change in how journeys are defined, executed, tested and improved. Done well, it can create a step change in understanding of how to deliver effective vulnerability strategies in this increasingly digital world.
In this future vision of ‘doing better things,’ PrinSIX is keen to play its part.
A journey through the FCA regulatory sandbox (Deloitte)
The PrinSIX FA digital sandbox pilot (White Paper)
About the Author
Ian Tomlin is a management consultant and writer on the subject of enterprise computing and organizational design. He serves on the USTECH GLOBAL European Management Team. Ian has written several books on the subject of digital transformation, cloud computing, social operating systems, codeless applications development, business intelligence, data science, office security, customer data platforms, vendor management systems, Managed Service Provisioning (MSP), customer experience, and organizational design. He can be reached via LinkedIn or Twitter.
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