How can data analytics enable the ethical treatment of vulnerable customers?

By definition, the pandemic affected everyone: but it did not affect everyone equally. As we enter a new phase, it is apparent that some customers have been left more vulnerable than others and, as the global financial crisis of 2007/8 taught us, that vulnerability cannot be ignored if we are to avoid lasting personal and economic consequences.

In this article, I will use the example of the UK’s Financial Conduct Authority (FCA) as a reference, but most of the points I discuss hold true in other countries.

Let us begin by hearing what they FCA has to say on the subject:

"We expect coronavirus to have significantly increased the number and severity of issues affecting consumers (for example ill health, bereavement and job loss), particularly for those already showing characteristics of vulnerability. This shows that, now more than ever, firms should be paying particular attention to the needs of vulnerable consumers." - FCA 2020

The FCA define a vulnerable customer as: "someone who, due to their personal circumstances, is especially susceptible to harm - particularly when a firm is not acting with appropriate levels of care". Note also that almost any individual cam become temporarily vulnerable (anxious, material loss) through unfortunate errors and oversights by a brand.

The UK’s FCA has regulatory and other oversight over financial businesses and markets. Increasingly concerned about the effects of COVID and other disruptive challenges to the fair and honest treatment of consumers, the FCA is taking a leadership role to encourage or enforce proactive, meaningful and sustained actions by businesses vis-à-vis the vulnerable members of their consumer ecosystem.

The FCA also understands vulnerability to represent a spectrum of risk - where "All customers are at risk of becoming vulnerable" and where characteristics of vulnerability increase this risk. The FCA cite a recent study they commissioned which found that "53% of adults display …a characteristic of vulnerability. This is an increase of over 3 million since February 2020".

Therefore, the FCA has consequently adopted a ‘vulnerability lens’ in planning its approach to future supervision and intervention, with the goal of changing the behaviour of financial services firms to protect vulnerable customers. This culminated in its Guidance for firms on the fair treatment of vulnerable customers.

As the corporate legal practice Pinsent Masons put it, the FCA "will not need the guidance to take action against firms where there is vulnerable customer detriment, [but] complying with the finalised guidance will offer the potential for a safe haven from enforcement action".

The fuller analysis from Pinsent Masons is well worth reading - but in this article, we're going to look at how Anthrolytics can assist any organisation wanting to take appropriate protective measures to support the vulnerable. In other words, doing right by their customers, as well as avoiding any risk of censure.

This is Corporate & Social Responsibility (CSR) or Environmental, Social, and Governance (ESG) on steroids. It is also an ethos that we at Anthrolytics wholeheartedly endorse. Indeed, we were founded with a principled, ethical 'North Star'.

Whilst artificial intelligence, data analytics and customer interaction mining are often criticised by lobbyists and consumer rights groups for the ways in which specific micro-audiences can be targeted for marketing activities - there is a significantly more beneficial flip side.

More difficult to do, but well-worth the effort, is ensuring that vulnerable customers (and those on a trajectory towards vulnerability) can be identified and a supportive hand extended; after all, it is in all our interests that we help these customers get back on an even keel.

Furthermore, the FCA seeks to “avoid promoting a ‘tick-box’ approach, or introducing sector-specific rules at this stage, but instead wants to encourage firms to embed the fair treatment of vulnerable customers in their culture in a way that corresponds to their customer base, size and business model".

In other words, enterprises must work to ensure that they adopt a care-driven approach to identifying, engaging and effectively managing the swiftly increasing number of vulnerable customers largely hidden in their databases.

Also, corporates must do more than ‘play lip service’ to the guidance, instead actively embrace delivering real and positive impact. This will be achieved, say the FCA, by embedding this ethos into the very corporate culture of businesses.

A key aim of issuing the proposed Guidance is to help ensure that vulnerability is taken seriously by firms, and that it prompts action by firms to embed the fair treatment of vulnerable consumers into their culture, policies, and processes throughout the whole consumer journey (FCA 2020).

Think of the benefits to the consumer of the retail banking institution which senses that a customer is experiencing financial or other stress and acts to provide both practical support (extended credit or fee forgiveness, signposting to additional wellbeing, or career-counselling, etc.). The bank too benefits as less debt is written off, with little hope of recovery.

We recognise that there is a world of difference between customers who will not pay, versus those that cannot pay (yet), or customers who just need some breathing space whilst they get their lives back on track; a behaviour that is as much about motivation as it is circumstance.

The capability to ‘sense and respond’ appropriately will deliver massive benefits to individual consumers and build foundations of trust, even delight, when a business extends genuine help to a customer experiencing financial or other distress, and that will often translate into a more valuable relationship in the long run. But how do you find the vulnerable customers amongst the sea of other customers?

How to find your vulnerable customers

Technology has now emerged that enables us to look at the dynamic ocean of actions and interactions, understanding that the earlier the identification and intervention, the sooner the customer can be aided to weather the storm: and maybe even begin to help them ‘make the weather’ rather than just be subject to it.

We are able to place an advanced fusion of data analytics and behavioural science at the service of financial services and other institutions. At Anthrolytics, for instance, our unique technology and consulting services enable us to enrich business data, and remove any ‘data deserts’; giving our clients the capability to identify and score individuals who match the criteria of being vulnerable customers and initiate action for those who are on a trajectory towards vulnerability.

And while it is often the case that businesses are supremely knowledgeable about how to best engage and support their customers, we also offer facilitated workshops on four key themes that FCA research found to be core to the fair treatment of vulnerable customers:

• Recognising vulnerability and responding to customers’ needs.
• The value of sympathy (empathy).
• The importance of empowered and knowledgeable staff.
• Addressing communications needs.

This, then, is the next step in personalising products and services: data analytics combined with behavioural science - powering the ability of a business to act with Digital Empathy™ in a timely, efficient, and impactful way. For companies which implement this approach, it is also a new source of competitive advantage – less bad debt, more profitable and loyal customers.

It is our belief that the world is at a turning point, one where the opportunity to deliver competence with compassion will become the next competitive battleground, with the winners being those organisations who can demonstrate that their customers are more than just a number. We also believe that Digital Empathy can positively impact the bottom line without sacrificing the vulnerable.

If you would like to talk with us about how Anthrolytics could help your organisation, please contact us at: [email protected]