Financial services: Can social responsibility ever go too far?

30 November 2018

“With great power, comes great responsibility” - words that may mean more to some than others, but which resonate more than ever in today’s world of big data and sophisticated analytics. While the power of data and analytics have been utilised by financial services for decades, the Financial Conduct Authority’s priority focus on vulnerable customers and its expectation of firms has sparked a shift in its use. Firms are now starting to use the power of data to help identify customer behaviours and potential vulnerabilities. Such a detailed understanding of customers is without a doubt very useful, but with this greater power of understanding, should firms be more socially responsible for their customers? And can a firm ever go too far in this regard?

A good starting point in answering these questions is the FCA’s definition of a vulnerable customer: someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care. The initial challenge for firms then, is the fact that not all vulnerabilities and behaviours can be gleaned from financial data, especially if a customer uses many service providers. Aside from financial vulnerability, a range of other factors, including physical or mental impairment, can cause short or longer term vulnerability. Providers generally have little to no visibility on such factors unless the customer chooses to tell them. Recent PwC research found that 70% of customers with a vulnerability had not informed their service providers, and 46% of those would not feel comfortable doing so 1 . This means that there are likely to be many customers out there who are in vulnerable positions but not being treated with appropriate levels of care.

Admittedly, it is somewhat challenging for firms to provide appropriate levels of care when a customer does not disclose, but this is where the power of data and analytics is useful. Take a current account for example. The wealth of data it can contain on daily income and expenditure is not to be underestimated. After applying a layer of vulnerability metrics, account providers could potentially identify customers with gambling or alcohol addictions, spiralling debt problems, bereavement and critical illnesses. It is feasible that a firm could then automatically apply a gambling block on an account, preventing payments to gambling companies, or even prevent loan advances entering an account if spiralling debt is an issue. Would this be seen as a breach of privacy, or the socially responsible thing to do?

PwC’s research suggests the majority of customers would prefer a firm talk to them about any signs they might be in or getting into difficulty, and would view this as good customer service. So while an automatic block could be viewed as going too far, a phone call to a customer to explore the issue identified, in a sensitive, open manner, could be a better solution. Whatever the final outcome is, it is important for firms to reflect upon the desired skill set for customer facing staff and training they may require. Taking the time to listen to customers and empowering call handlers to provide tailored solutions promotes a culture where good, responsible outcomes are likely.   

Ultimately, whether a customer decides to disclose sensitive information, or even accept help, is their choice. But as a minimum firms should be visibly open to, and supportive of, customers sharing their difficulties. Whether firms should be more socially responsible for customers will depend on the services provided. But with the FCA seeking cultures focussed on good outcomes, and not just compliance box-ticking, it would be hard to argue against firms taking responsibility where their data identifies potential difficulties and negative behaviours. With the power of data, comes the responsibility to appropriately support customers.

1  PwC Research Quantibus 2018

Tom Boydell

Tom Boydell | Manager
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Sharron Worton | Principal Insight Consultant
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Thank you for sharing your father’s experience, Simon. It brings to life the challenge of balancing a customer's responsibility for their own money, including their right to spend it as they wish, versus the level of care provided by a firm. As we say above, opening a discussion about anomalous or potentially detrimental behaviour would be seen as good practice by regulators. But if the customer persists (like in your father’s case), and you have no evidence against their capacity to make decisions, what else can a firm reasonably do? The FCA is currently discussing a duty of care for firms which may provide some clarity in the future - so watch this space!

Fascinating challenge.

Many years ago, my now-retired bank manager father had a complaint from a family of an elderly lady who had - basically - spent all her substantial savings, and was now in penury.

The family complained that the bank had a duty of care to help her manage her money better and stop her spending all her savings. The bank argued that as my father had offered her the chance to discuss her depleting resources, and as she had very firmly told him to mind his own business that they had done all they reasonably could.

This was decades ago, in an age long before databases could reasonably detect such activity, let alone mitigate it.

I do wonder, though, what today's regulators would view the bank's "duty of care" under similar circumstances.

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