TLDR: It’s time to commit to a collaborative design programme, because the chances are vulnerability doesn’t mean what you think it means, and fixing it is more complex than you think.
In my last post on the new FCA Consumer Duty, we considered the idea of good outcomes, and new rules requiring firms to avoid causing foreseeable harm. In this post, we’ll dig a little deeper into what that actually means – especially when it comes to the often overlooked and misunderstood concept of vulnerable financial circumstances, and consumers with vulnerable characteristics.
Collaboration is key to winning in the era of the FCA Consumer Duty
The FCA expects retail finance firms to address “the needs, characteristics and objectives of their customers – including those with characteristics of vulnerability”. This goes beyond the usual customer experience refinements like analysing customer support calls to identify problem areas in existing products. Clearly, improving existing products and services is important but it’s mostly reactive. The FCA wants to drive competition and innovation in the market, and the sort of innovation that wins market share and retains customers needs a proactive, collaborative design process.
Collaborative design means generating ideas and building prototypes with input from customers, and testing them with customers too. It helps customers to reveal their unmet needs through 1-to1 interviews, ethnography studies (fly on the wall observations and user diaries), user research, journey mapping and prototype testing sessions. These exercises develop customer insight and empathy – and empathy is critical because if you are a married middle-income professional with a mortgage and a company phone, you aren’t immediately going to understand the unmet needs of a single renter with a pay-as-you-go mobile and a zero-hours contract.
One of my favourite examples of collaborative design projects comes from the team at Monzo, where their designers worked with customers to create real-life customer experience stories. They used these ‘customer stories’ to help new customers identify with a persona that matched their own circumstances, and with it, a bundle of appropriate products and services (with the right levels of supporting information). It’s not a perfect model, but it’s a lot better than the well meaning educated guesswork of years past. Especially for vulnerable customers.
Why are vulnerable characteristics such an important focus for retail finance?
The focus on design for vulnerability comes from the FCA recognising that a huge cross-section of society has easy access to retail finance via online and mobile channels, at a time when the economic outlook is incredibly tough and demand for credit is rising. Demand for retail finance from such a broad demographic means virtually every product and service has the potential to cause foreseeable harm to vulnerable users – therefore designing for vulnerable characteristics should be a baseline consideration, not an afterthought. This is because vulnerability applies to everyone at some point, but it’s not always obvious, or predictable. Here’s a little thought experiment…
- Is a shopaholic teen who keeps hitting the Klarna option on fast fashion apps vulnerable?
- What about music fans and movie lovers with too many streaming apps?
- How about online poker fans and football pundits with a weekly flutter on a betting app?
- A middle-aged high earner in a messy divorce with a big mortgage?
There’s no right answer, obviously. And that explains the design challenge for tackling vulnerability.
Financial vulnerability can arise from neurodiversity, or accessibility conditions like dyslexia, brain injuries and long term illness. Special financial needs might occur during a period of poor mental health, bereavement, divorce, or traumas like crime and domestic abuse. These unpredictable life events create unmet needs and we need to design products and services that address them.
If a customer hits a speed bump, have you planned to help them deal with it?
In addition to the many different ways customers experience vulnerabilities, in the post-Covid, high inflation, recession-hit UK, we also need to provide support for more predictable problems like short term and long term unemployment and sickness, as opposed the penalties and repossessions we’ve seen in previous recessions. Research by the Money Advice Trust is quite clear that the poorest adults in society generally pay more for essential services and credit. They report disabled people pay more for insurance (if they can get it) and people with mental health conditions are 3.5 times more likely to find themselves in problem debt.
Addressing these life crises and social inequalities as an industry is a huge product and service design challenge but the FCA wants to know – if a customer suddenly needs help to control their finances – how your offering prevents foreseeable harms. Getting to the right answer means collaborating with customers in a more inclusive design process.
Getting started with vulnerability
The time to start reviewing products and services is now. The FCA Consumer Duty places the ball firmly in the court of the designers to create products and services that will enable everyone to leverage credit and finance like it was intended – to smooth out tough times – without paying a penalty if their circumstances change. A collaborative, inclusive design approach is the most efficient way to achieve this – and win market share away from the laggards after the July 2024 FCA Consumer Duty deadline passes.
Ben is on hand to answer your questions.