Posted: 14th June 2016
The FCA published its Occasional Paper (OP) on Access to Financial Services in the UK on Monday 24th May. With vulnerability and customer outcomes at the top of the regulator’s thinking at the moment, the OP provides a timely examination of access barriers and financial exclusion issues existing within financial services.
The OP acknowledges that financial exclusion is an enormously complex issue, and that it will take the industry as a whole to tackle accessibility barriers. Indeed, it commissioned the paper to act as a catalyst for industry debate in this area.
The package published by the FCA included:
- The Occasional Paper, ‘Access to Financial Services in the UK’
- A short video on consumer access accompanying the paper
- Mind the Gap – Consumer Research exploring the experiences of financial exclusion
- Mind the Gap – a video accompanying the research
So with much work taking place in this area (and plenty of other FCA work on advice and vulnerability), what can firms be thinking about with regards to aiding access to their products and services?
‘The maze’, ‘the fog’ and ‘the void’ of access issues
At this stage, it’s worth looking at the high-level concerns the OP describes. It suggests that access issues can be categorised into three distinct ‘buckets’:
- ‘The Maze’ generally refers to the complexities of products and the lack of customer awareness of what processes entail
- ‘The Fog’ describes confusion around terminologies, the jargon firms use to describe their products and the challenge for consumers to compare prices on this basis
- ‘The Void’ refers to consumers for whom physical or capability issues prevent effective interaction with financial services
The paper also provides specific detail and examples of the issues each category of customer might be experiencing.
Social and technological trends that impede access
The paper also breaks down in more detail some of the wider social challenges that are seen to obstruct consumers’ access to financial services. Where is your firm on its thinking in the following areas?
The rise of digital
The OP describes the shift to online and digital channels in financial services. Understandably, firms seeking more convenient (and more cost-effective) engagement with their customers have made the move to these channels. Disseminating products to web-savvy consumers can of course bring benefits to both business and consumer alike, such as convenience in accessing information and performing transactions.
However, this is not the case for all consumers, and many struggle to interact through digital channels. Does your firm offer sufficient support for those whose barrier to access is their technological understanding? With increasing numbers of physical branches being closed, how you support less tech-savvy customers will become more important, especially those in rural areas, where physical access can be more of a challenge. Solutions such as mobile branches are beginning to enter the market – would this help your firm service its customer base? Is there anything else your firm can be doing?
An ageing population
With those aged 85+ now the fastest growing age group in the UK, what measures has your firm put into place to deal with the changing needs of an ageing population?
Aside from some of the issues in the digital space, the report also acknowledges the need to prevent ageing consumers from taking on unsustainable debt, but equally, older consumers should still be able to access products that meet their needs and cater to their circumstances. Do you know what impacts, if any, can be attributed to your acceptance criteria for products? If so, can you see a market for more products designed around the needs of – and risks posed by – older consumers?
Financial crime and other compliance issues
Firms will be well aware of financial crime regulation and its prominence in today’s financial services industry. Developments in the regulator’s supervisory approach continue to run parallel to the increasingly intricate methods of financial criminals. The OP asserts that some of these measures may actually serve to alienate consumers who are asked to prove, for example, the source of their wealth.
With this in mind, how can you ensure your financial crime processes do not alienate vulnerable customers? The OP recommends firms instil clear and consistent requirements when it comes to proof of identity or verification of the source of funds – the importance of consistency cannot be underestimated here, as differing processes between products (unless necessary) can make the experience of customers unduly confusing.
If a customer is unable to produce the required documentation, does your firm ensure that customer is made aware of how to obtain it? What support is on offer in these cases? Effective interaction between your organisation (for example, the people on the front line of the business) and customers experiencing this situation will enhance the trust and advocacy of those customers.
Automated processes - credit scoring
The report looks at credit scoring, thin credit files and searches and refers to the issue of confusing relationships between lenders and the credit reference agencies, which adds to the confusion for consumers.
The paper suggests what the ideal customer journey might look like:
- An obvious one-stop shop for customers to go to for trusted and independent guidance
- The ability to shop around for credit based on prices the customer is likely to secure
- Clear reasons why an application has been turned down, together with suggestions for improving credit scores – signposting to other lenders if relevant
- An ability to easily access credit scores – including the statutory report which is cheaper
- Credit files which are easy to understand and accurate and an easy service for getting errors to credit files updated
How does your firm address some of the barriers to understanding caused by automated processes and credit scoring for consumers? There have been some innovative steps taken by firms to increase understanding, but consumers are still being caught in a maze of impersonal decisions made by computers. How can your firm be confident that it is not unduly excluding certain segments of the population due to an automated decision tree?
Can we expect an Industry reaction?
Although not feeding directly into new rules, Occasional Paper 17 is, as the very least, stimulating debate. Past OPs have fairly consistently signified the regulator’s future supervisory approach, and so firms can expect further focus in this area, even if, at this stage, that focus is not fully defined.
Activities of particular interest to firms in the light of OP17 might include ensuring policy delivers for vulnerable customers and increasing the internal focus on customer outcomes testing, as the regulator seeks to ensure good outcomes for all users of financial services, including those customers which the regulator has termed as ‘imperfect consumers’. The findings of OP17 also tie into the continuing debate on de-risking within financial services.
The paper makes it clear that access to financial services is globally important to financial stability and the integrity of markets, and that where that access is restricted, consumers are more likely to use the cash economy and alternative providers. In the process, consumers will be more vulnerable to being exploited or scammed by criminals. The importance of getting access right cannot be underestimated by firms.
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