Rethinking Customer Support: Banks Must Step Up in Uncertain Times

Amidst economic uncertainty and soaring inflation rates, banks are urged to reevaluate their approach to supporting customers. In an article by Steve Round, Chairman of the Governing Board Forum at GABV, published at Fintech Magazine, the need for banks to prioritize the financial well-being of their customers is emphasized. Failing to do so not only hampers individuals and communities but also undermines the banks’ own interests.

The global economy is grappling with persistently high inflation, projected to reach a mere 2.8% in 2023. Rising energy and food prices, compounded by the ongoing war in Ukraine, have prompted central banks worldwide to raise interest rates. Consequently, inflation has surged to 10% in the UK and 6% in the US, further burdening consumers’ real incomes and exacerbating their financial challenges.

Drawing from personal experiences working with vulnerable populations through the Big Issue Foundation and the GABV, Round highlights the adverse impact of such events on society’s most at-risk individuals. As nearly two-thirds of chief economists anticipate a global recession, the net of financial vulnerability is poised to widen like never before.

Banks must now proactively shield financially vulnerable consumers, not only as a moral imperative but also as a sound business strategy. Loan delinquency, mortgage defaults, and diminished consumer confidence harm not only individuals but the overall economy. With the European Banking Authority introducing new indicators to measure consumer protection and the UK’s Financial Conduct Authority preparing to implement a Consumer Duty, banks cannot evade accountability. The forthcoming regulations will necessitate banks to demonstrate a deep understanding of their customers’ needs and offer tailored products accordingly.

The time is ripe for banks to innovate and create relevant products that serve as safe havens for those in need. To accomplish this, banks must act swiftly and leverage data to meet the challenge. However, the author questions whether banks are prepared to rise to the occasion.

While financial inclusivity has been a buzzword for years, Round contends that true inclusivity demands bold and substantive changes, rather than superficial offerings. He highlights credit scoring systems as an example, where renters paying substantial amounts to private landlords receive no credit benefits, unlike homeowners who boost their credit references through on-time mortgage payments. By establishing a central rent database, banks could assess renters’ creditworthiness based on their consistent rent payments and gain valuable customer insights to evaluate affordability and interest in other financial products.

Furthermore, Round argues that banks should proactively identify customers who are financially vulnerable by analyzing spending patterns. By obtaining a comprehensive, real-time view of customers’ financial activities, banks can anticipate and offer targeted assistance to those facing hardships. Identifying at-risk customers early on reduces the risk of defaults on loans or credit payments.

In addition to guidance and support, banks should design products with money-saving features in mind. Multiple wallets to manage different bills or the ability to halt direct debits that may push customers into overdraft are examples of practical solutions. Round cites The Change Account, a specialist bank account he founded, as an initiative that aimed to assist the unbanked and under-banked in managing their finances effectively. Financial service providers can also refer at-risk customers to debt charities that offer free advice, helping individuals find sustainable ways to manage debt and achieve financial freedom.

Round concludes by urging banks to embrace a move towards financial inclusivity. By leveraging cloud-based core banking platforms, which facilitate the configuration of complex products, banks can make this shift without incurring excessive costs or labor. Regardless of their size, banks have no excuse for withholding personalized and helpful banking features from any customer. Failure to address these pressing issues may result in customer attrition, increased bad debt, or regulatory non-compliance penalties, putting banks at a significant disadvantage.

The current economic climate necessitates a paradigm shift in how banks support their customers. Steve Round’s article underscores the urgency for banks to prioritize the financial well-being of their customers, not only for ethical reasons but also to safeguard their own interests. By embracing innovation, harnessing data, and designing inclusive products, banks can offer much-needed support to vulnerable customers and foster a stronger, more resilient financial ecosystem.