I was recently leading a training session with a client and we got onto the challenges which the increased digitalisation of customer journeys pose for consumer credit lenders, particularly the “one size fits all” nature of digitalised journeys.
Financial services have been sold online for a long time now, but never before have we seen the pressure on “quicker, easier, fewer friction points” in customer journeys. The “one-click” approach clearly has advantages for firms and many of their customers, but it cannot possible cater for all in society.
The report issued by Christians Against Poverty (CAP) this week on financial difficulties and digital exclusion is fascinating. According to this report, 24% of CAP clients can only access the internet via a smartphone and 15% have never accessed a service online. With the closure of retail stores over the last 18 months, whether temporarily due to lockdowns or permanently, we have seen an increase in consumer credit being sold online, particularly in sectors such as motor finance where manufacturers accelerated their online sales processes during the pandemic.
The CAP report makes various recommendations regarding the design of financial services journeys. One of those recommendations is that “digital services should be designed to be easily completed by people using a mobile device”. This recommendation aligns to the FCA’s proposals on the Consumer Duty and in particular the proposed outcome that “communications equip consumers to make effective, timely and properly informed decisions about financial products and services”. One of the poor outcomes which the FCA mentioned in its consultation paper for the Consumer Duty is online communications and the fact there is evidence to support that consumers are less likely to read through lengthy disclosure documents when applying for financial products on a mobile phone.
A link to this report was tweeted out by the FCA on its website – a clear sign of how much this aligns to the FCA’s current priorities whether it is the Consumer Duty or its recently issues finalised guidance on vulnerability. There is definitely a thread running through the FCA’s recently publications in this space.
So what should consumer credit lenders be doing? Whilst the CAP report focuses on digital exclusion; there are a range of vulnerabilities which may mean a customer needs additional support or to access services through a different channel. The FCA’s Financial Lives Survey found that in October 2020, 1 in 2 adults had at least one vulnerability factor. Whether it is poor financial numeracy, English not being a first language, neurodiversity; any of these or other factors may mean a person is better serviced by a different channel than online, or would be better served by information being provided in a different way. The challenge for lenders is that online journeys naturally favour a “one size fits all” approach. The Consumer Duty will require firms to do more to think about the outcomes received by all customers and how a "one size fits all" journey may not serve vulnerable customers.
However, better supporting customers with vulnerabilities is another reason why consumer credit reform is needed. Consumer credit documents can be written in the most simplistic language but by their very nature they are not user friendly. They are not easy to navigate on mobile devices. Firms have no choice but continue to serve consumer credit documents in the required form. Of course, they can choose to explain the consumer credit agreement to a customer using innovative and easier to understand methods, but the point stands that it is time to change the law to make consumer credit documents easier for customers to understand.
Firms and public services should take into account the needs of people who are facing digital exclusion when designing and pricing products and services.