There is a very 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. 

So, 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).

Preparatory research

The FCA Sandbox encouraged us to speak to academics, charities, compliance specialists, regulators, and technologists to get a wide perspective of opinions.  The views in this article are my own and should not be considered as representing the opinion of any other individual or organisation.  They are though formed after some insightful conversations with experts.  My conclusion is that neither view is right.  Different customers require different onboarding channels depending on their needs and circumstances.

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?

Balancing lending risks and rewards

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 will need to intervene.  Advisor interventions provide their own challenges.  Simply moving online questions off-line is ineffective, and the journey moves to a much more consultative environment.  One that asks open questions, and delegates outcome decisions to advisors.

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The new questions personalised journeys foster

It is also very important to recognise the challenges lenders face when implementing effective advisor led journeys that reliably deliver good, consistent customer outcomes.  It asks a whole new set of questions around training and competence frameworks, QA, management oversight and controls.  The risk of ‘white noise’ is significant, where real vulnerability gets lost due to the volume of unnecessary referrals.  Human intervention needs to be very targeted, and advisors focused on those at significant risk of vulnerability if it is to be effective.  A combination of pure digital and hybrid journeys, if properly defined and executed, have the potential to deliver good outcomes for customers, and ensure everyone’s objective of protecting vulnerable customers is achieved.

The importance of testing fine-grained changes to journeys

So, 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?  What I find most striking is the lack of answers within consumer credit to any of these questions.  While anecdotal examples exist, there is little best practice.  There are few examples 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.

Summary

So, my overall conclusion is 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.  But it can create a step change in understanding of how to deliver effective vulnerability strategies in this increasingly digital world.  PrinSIX is keen to play its part.

About the Author

Julian Graham-Rack
UK CEO – PrinSIX Technologies

Julian is CEO and founder of PrinSIX Technology, a FinTech delivering a unique new approach for lenders to meet their regulatory and commercial onboarding objectives.

Julian’s passion for innovation within consumer lending came from his five years’ experience as the UK CEO of the US sub-prime lender Curo Group.  Joining in 2014, Julian was set the challenge transformed an old style payday lender into an innovative digital lender in an FCA regulated world.  This experience, gained from testing and refining new digital and analytical regulatory and commercial strategies with FCA oversight was the inspiration for PrinSIX.  It inspired the creation of a proposition to help meet every lender’s challenge of optimising commercial outcomes without compromising customer outcomes.

During this time Julian was also president of the Consumer Finance Association, the trade body that represents the interests of the alternative lending industry.