VULNERABLE CUSTOMERS WHAT HAPPENS WHEN THE MONEY RUNS OUT? - OCTOBER 2020 - Ipsos
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
VULNERABLE CUSTOMERS WHAT HAPPENS WHEN THE MONEY RUNS OUT? OCTOBER 2020
THE PERFECT STORM THAT
If they get their response right, they
are likely to continue to win hearts
and minds. But if they get it wrong,
MIGHT SPELL DISASTER FOR
their actions – or inaction – could
define how their brand is perceived
for years to come. The elephant in
UNPREPARED LENDERS
the room is the looming recession
and the amplifying effect it may
have on this developing situation.
Latest figures from the Institute for
Employment Studies (IES) suggest
that completed redundancies could
reach 735,000 this autumn.3
One of the big questions banks and other lenders are asking right now is how
many customers will default on their loans when repayment deferral agreements This time of reckoning for firms
come to an end in October. While conventional market research surveys can occurs when there is increasing
go a long way to understand this, we would also argue that a complementary regulatory pressure from the
approach is needed to help lenders really understand the magnitude of potential Financial Conduct Authority (FCA)
vulnerability and anticipate the needs of newly vulnerable customer. on financial services firms to follow
guidance provided for them to meet
THE UK BANKING the needs of vulnerable customers.
SYSTEM AND THE There is also bite in this guidance
BRITISH GOVERNMENT with a warning that if firms do not
HAVE PROVIDED treat vulnerable customer fairly, they
UNPRECEDENTED will intercede.4
FINANCIAL SUPPORT TO
CONSUMERS DURING THE In short, the remaining months
COVID-19 PANDEMIC. of 2020 could see a reputational
tipping point for lenders.
At the beginning of July, more than The banks’ actions and
1 million consumers had agreed interventions have undoubtedly
payment deferrals on credit card contributed to an uplift in Net
debt, 707,000 had agreed deferrals Promoter Score (NPS) and brand THE ELEPHANT IN THE ROOM IS
on personal loans and 1.9 million equity scores for many. However, as THE LOOMING RECESSION AND THE
on mortgage repayments.1 In loan payment deferrals and furlough
addition, 9.6 million UK workers support come to an end, lenders AMPLIFYING EFFECT IT MAY HAVE
have been furloughed.2 face a reputational cliff edge. ON THIS DEVELOPING SITUATION.
MEETING FCA
EXPECTATIONS
THE FCA REQUIRES One of the key challenges
FIRMS TO IDENTIFY AND Recognising vulnerability firms face is fulfilling the first
UNDERSTAND VULNERABLE and understanding FCA requirement of identifying
CUSTOMERS’ NEEDS, SHARE customers’ needs vulnerability and determining the
THIS KNOWLEDGE ACROSS needs of vulnerable customers.
THE BUSINESS AND THEN Arguably, once this is known, the
ENSURE COMMUNICATIONS, remaining requirements become
The value of that little bit easier. However,
PRODUCT PROPOSITIONS AND sympathy
CUSTOMER INTERACTIONS in many cases vulnerability is
MEET THESE NEEDS. not apparent from the way in
which customers behave or the
Further clarification issued in questions they ask customer-
July this year builds on the 2019 The importance of facing staff, their physical
guidance by identifying four key empowered and appearance or through the wealth
themes for firms to focus on: knowledgeable staff of transactional data held on the
bank’s database. This difficult
question is further complicated
Meeting vulnerable by the FCA’s inclusion of potential
consumers’ vulnerability within its definition.
communication needs
INCIDENCE OF
VULNERABILITY
HASN’T GROWN, YET
AT IPSOS WE HAVE BEEN
WORKING CLOSELY WITH BOTH
THE REGULATOR AND FIRMS TO
UNDERSTAND VULNERABILITY,
BOTH BEFORE AND DURING THE
PANDEMIC.
Ipsos’ Financial Research Survey i.e. redundancy/loss of job, or
(FRS) data identifies that 43 per unwanted reduction in
cent of the adult population in Great working hours.7
Britain are currently vulnerable or
potentially vulnerable as defined However, the proportion struggling While conventional surveys have
by the FCA.5 Recent analysis financially (classified by the FCA informed lenders of the numbers
of the FRS Vulnerability module as having low financial resilience) of vulnerable customers, they do
shows that, at an aggregated has remain unchanged. Research not answer the question of what
level, the proportion of vulnerable conducted by Ipsos during the happens when the majority of Ipsos’ Financial Research
customers has remained relatively pandemic suggests that many of this COVID-19 loan deferrals come to Survey (FRS) data identifies
unchanged throughout the group are keeping their heads above an end and when state-funded that 43 per cent of the adult
pandemic.6 Indeed, Ipsos found water through short-term coping furloughs are withdrawn. What effect
only minor spikes immediately after strategies (eating into savings, taking will this have on the proportion of population in Great Britain
lockdown when the proportion out additional debt products) and UK adults classed as having low are currently vulnerable or
of adults experiencing negative through short-term Government and financial resilience and what support potentially vulnerable as
life events jumped, driven by industry support measures (furlough will these customers be looking for
predominantly work-related factors, and payment deferrals). from banks? defined by the FCA.5
SEARCH ENGINE DATA REVEALS
EARLY DIRECTIONS AND
POSSIBLE ACTIONS
SOMETIMES DESCRIBED reveals key shifts in concerns that Many people question the impact
AS THE GUARDIAN OF OUR may shape customer decisions at of joining the scheme on their
SECRETS, SEARCH DATA the end of October. long-term finances
PROVIDES A WINDOW INTO Search queries such as ‘will
THE SHIFTING PRESSURES, Many hope banks will extend the mortgage holiday affect my credit
CONCERNS AND ASPIRATIONS scheme rating’, ‘will mortgage holiday affect
THAT FINANCIAL SERVICES The prevalence of questions such as future lending’ and ‘will mortgage
CUSTOMERS HAVE. ‘can I extend my mortgage holiday holiday affect re-mortgage’ indicate
Halifax’, ‘are Santander extending some are increasingly looking
Analysis of historical and real- mortgage holiday’ and ‘mortgage towards the future and assessing
time search data can provide an holiday for a year’ suggest genuine the longer-term impact on their
early indication into the direction concern about the ending of the financial status.
of financial decisions and suggest scheme and a hope that specific
actions to shape desired outcomes. banks will extend it. Many people are weighing up
alternative options
With 1.9m agreed deferrals of Many participants in the scheme Analysis of searches relating to
mortgage repayments in July, we have distinct circumstances ‘mortgage holiday’ reveals questions
analysed the most commonly The more recent appearance such as ‘mortgage holiday or
asked questions on Google of additional queries such as interest only’, ‘is mortgage holiday a
relating to ‘mortgage holiday’. ‘mortgage holiday maternity leave’ good idea’, ‘mortgage holiday risks’
While the volume of searches has and ‘mortgage holiday for buy-to- and ‘mortgage holiday calculator’
declined since the initial flurry at let property’ reveals the specific indicate a need for information
the announcement of the scheme, circumstances of concern about the and advice on whether a mortgage
comparing snapshots of the scheme ending. holiday is right for them, and
underlying questions between concern about the long-term impact
August and September 2020 on their finances.
STRAWS IN THE
WIND FOR OCTOBER
A KEY BENEFIT OF SEARCH
DATA IS THAT IT CAPTURES THE
OFTEN VERY SUDDEN PATTERNS
IN CONSUMER THINKING.
the many detailed search queries
While the scheme’s expiry is some reveal the need for banks to
weeks away from this analysis, provide guidance to the many
search data gives some tangible who have specific financial
considerations for banks to circumstances: buy-to-let,
manage the potential maternity leave etc.
reputational and financial
impact from November. 3. Equally, searches about the With the volume of potentially frontline staff prepare for the
wider and longer-term impact vulnerable customers likely inevitable barrage of queries that
1. The Government schemes of participating in the scheme to increase over the next few will come from customers who find
have been a lifeline for millions underlines the need for clear and months, lenders would do well to themselves in financial difficulty.
of consumers. Search queries consistent communication on this. understand what their customers
around whether banks will extend are thinking. We believe this can We are all faced with an
the scheme reveal a vital need for 4. In support of increased be achieved through analysing unpredictable winter, in many ways.
banks to set clear and consistent transparency, the need to provide unstructured search engine data. However, financial institutions can
expectations as soon as they can. tools for consumers to make their Insights from this analysis will help look to their customers’ online
own informed decisions on their lenders develop targeted, proactive behaviour to gauge how best to
2. While general searches around finances following the end of communications to potentially provide what’s needed and invest
‘mortgage holidays’ has tapered, the scheme. vulnerable customers and help in their future brand reputation.
REFERENCES
1. https://www.ukfinance.org.uk/covid-19-press-releases/
lenders-provide-over-one-million-repayment-deferrals-on-
credit-cards
2. https://www.gov.uk/government/collections/hmrc-
coronavirus-covid-19-statistics
3. https://www.bbc.co.uk/news/business-54125690
4. https://www.fca.org.uk/news/press-releases/new-guidance-
help-firms-do-more-vulnerable-consumers
5. https://www.ipsos.com/ipsos-mori/en-uk/financial-research-
survey-frs 43% of GB adults are considered potentially
vulnerable. Base: n=4,528 GB adults. Time Period: Monthly
data July 2020
6. The FRS team have worked closely with the FCA to use their If you would like to hear more about
definition of vulnerability to ensure we are able to track the
four vulnerability drivers highlighted in the FCA Vulnerability the work we are doing in this field
Guidance and analyse vulnerability across firms please do not hesitate to contact:
7. https://www.fca.org.uk/publication/guidance-consultation/ Duncan.Fergusson@ipsos.com
gc19-03.pdf
Martin.Grimwood@ipsos.com
FOR MORE INFORMATION PLEASE VISIT: IPSOS-MORI.COM
You can also read
