Financial Vulnerability: Bringing the industry together

What do businesses see as the biggest challenges of this Cost-of-Living crisis? What can they do to best support their customers? What tools do they need to be successful? These are the questions we asked during our cross-industry round table and client interviews, focused on addressing the challenge of growing financial vulnerability of UK customers.

Building on our Financial Vulnerability campaign, we have heard from industry leaders across energy, water, customer focused charities and providers, that together represent 80% of UK Households’ utilities providers.

In this article, we share an overview of the perceived challenges, solutions and key success factors highlighted by our clients and industry partners around the topic of financial vulnerability. Quotes taken from the round table discussion are not attributed to any specific individual or organisation, as agreed by participants.

Our hope is that themes shared here influence the ongoing conversation on this pressing topic throughout 2022 and beyond.

Click image to enlarge

A rapidly deteriorating economic situation that is already impacting customers

The UK is facing the worst economic situation in our lifetimes. The average family faces at least a £2000 hike in annual bills, with Baringa analysis suggesting a 1.75% interest rate increase could reduce disposable incomes by 8% for the poorest in society. We discussed that financial vulnerability is now a very real feature of customer’s lives; borrowings are “jumping back up”, indicating that the COVID-19 savings piggy bank is emptying, and the number of pay day loans being taken to cover energy bills is increasing. Businesses must be aware of the risks:

Self-rationing: Customers may be self-rationing as a function of distress, not energy efficiency.
Emotional Distress: As economic pressures add to the toll on customers, increasing numbers of people are referencing suicide and violence to both organisations and charities (Christians Against Poverty have seen a marked increase in clients reporting suicidal thoughts).

Our round table was focused on the theme of how businesses can be part of the solution to financial vulnerability, exploring the challenges, solutions, and wider factors that will enable success.

PART ONE: Proactive identification of customers in, or at risk of, financial vulnerability

The challenge:

Customer knowledge & fears: Those new to debt will be “less used to knowing where and how to find help” and fear the stigma attached to financial vulnerability along with the barriers it could present through “unintended consequences of revealing their financial difficulty”.
Rapidly changing situations: It is “difficult to predict who will become vulnerable”, vulnerability may appear in groups and regions where it was not common previously and may not be “immediately obvious to suppliers”, meaning support is offered too late.
Negative perceptions: Proactively identifying someone as vulnerable risks “negative personal reaction, and potentially negative press coverage”.

The solutions:

Empower the customer: Allow customers to self-identify; provide them with “budgeting tools to compare incomings, outgoings, and debt”, and “reduce the fear-barrier by allowing customers to soft-flag potential debt concerns”.
Early warning systems: Explore data-led, cross-industry, early warning systems to identify the first signs of debt and offer “joined up support” with other companies.
Recognise the individual: Accelerate processes to get support more quickly to those who need it immediately and use social media support networks to engage those facing into debt for the first time.

Key success factors:

Cross-industry collaboration: Take a co-ordinated communications and media strategy across sectors (e.g. “a Smart Energy GB style government backed campaign on Financial Vulnerability”) and join up support offerings across businesses.
Principles based regulation: Allow organisations to adapt and innovate, and “use the Digital Economy Act to benefit vulnerable customers”

"It’s important to start using the tools that are available, speech analytics; service by design, tools that enable organisations to identify vulnerability."

Helen Lord, CEO, Vulnerability Registration Service

PART TWO: A customer-led ethos to develop propositions and support mechanisms

The challenges:

Empathy gap: “We don’t always have access to customer information and/or lived experiences”, and the spectrum of financially vulnerable situations is very broad when designing customer led change. This makes life challenging for agents who are under increasing pressure to show empathy.
Process & tools: Existing debt systems and processes are often “too slow and too rigid”, and there are limited “forums and feedback channels to learn from customers before they get into difficulty”.
Loyalty perceptions: Customers are confused whether to be loyal to, or switch, organisations to secure the best value deal. We need to “address fairness through loyalty”.

The solutions:

Close the empathy gap: Recognise that “no two people are in the same situation or life experience”; services need to be tailored to the individual, introducing new language that “reduces focus on terms like debt and vulnerability”, and train agents to “detect the more subtle triggers in conversations”.
Empower the front line: “Understand agents are human too, offer time and support to recover for colleagues after difficult calls”, encourage testing & learning solutions, and provide tools for teams to offer their customers (e.g. debt management tools, assistance funds).
Educate customers: Utility bills “aren’t always interesting to customers”, so we need to get creative and innovative in finding ways to get their attention (e.g. “linking financial help to reduced consumption and education on net zero”) and solve upstream problems, not just immediate needs.

Key success factors:

Leaders leading: Senior leadership being visible, active, and credible “trickles down through the organisation”, showing it is a top business priority, and enabling organisational change.
Accelerate net zero: Accelerating the shift to net zero “will benefit all in the long-term”, reducing dependence on gas, improving energy efficiency, and reducing bills.
Government support: “Can utilities solve this crisis without further government intervention?”. The industry needs to be realistic on what it can do by itself, and unified in lobbying for change where it needs support.

"We are now seeing a greater polarisation between those of us that can afford to actually pay for better levels of service and those that cannot."

The outlook for customers in 2022 - Jo Causon, CEO, Institute of Customer Services

PART THREE: Agile and flexible response to rapidly changing circumstances

The challenges:

Leadership obstacles: “Leadership make changes to business priorities leading to resources being pulled in different directions”. This can limit the effort available to adapt guidelines, train agents, and fix the legacy systems that restrict agility.
Perceived regulatory obstacles: Regulations can be seen as restrictive to agility with a narrow focus on the action or measure, not the customer outcome. Lead with experience and outcome focus to engage actively with regulators.
Cultural challenges: It can be “difficult to challenge ingrained thought processes among staff”, particularly if there has been a historic mistrust of the general public (e.g. if a team previously had a fraud prevention focus).

The solutions:

Cultural and process change: Make the financial vulnerability agenda part of the organisation’s DNA, invest in applying technology solutions to educate customers on financial wellbeing and support agents through difficult conversations.
Keep testing: “Don’t lose confidence to trial solutions because of the PR risk”. Work with regulators to reduce the perceived or real barriers to agility (e.g. “ensure data is shared with legitimate interests”).
Start with payments: “Agile payment methods can keep heads out of the sand”. Offering affordable solutions that work for the individual and the business is critical.

Key success factors:

Top-down sponsorship: Ensure leadership sponsors the Financial Vulnerability agenda and prioritises it in objectives and KPIs.
Inclusive success: Use “lived experiences to ensure digital solutions are inclusive to all” (while remaining regulatory compliant).
Share the journey: Ensure that learnings are shared across the industry, in collaboration with the regulators.

"We see people that will struggle for the first time; we are looking at affordability options for them such as payment breaks, data sharing with customers on payment credits and flexible payment plans."

The financial vulnerability challenge facing customers - Katy Taylor, COO, Southern Water

What's next?

The financial vulnerability round table demonstrated a level of cross-company and cross-sector collaboration that will be one of the key ingredients to success as we look ahead to a challenging 2022:

No one wins where debt is concerned: it is bad for society and bad for business.
“Considerate Companies” that take a customer-centric approach will emerge as winners in race for customer loyalty.
There is no “silver-bullet” solution to the challenges we face, there are many small, incremental improvements to be made

How are you supporting your customers through the cost-of-living crisis? Contact one of our experts to join the ongoing cross-sector discussion and work together to be part of the solution.