Do banks really understand customers’ needs?

  • A majority of respondents to a UK survey say they do not trust their financial services provider to support them in hard times
  • Customers are looking for better support and education from their bank in managing their money
  • Banks need to rebuild trust with their customers, but AI is not the path to doing that

More than four months after the Financial Conduct Authority launched its consumer duty rulebook — a collection of guidelines designed to set clearer standards of protection for consumers of financial services — firms have started moving towards a more customer-centric modus operandi. However, plenty of work still needs to be done.

In November, London-based professional services firm PA Consulting found that the majority of people in the UK do not fully trust financial service providers to support them in times of economic hardship (based on a survey of 1500 people).

Caroline Wayman, a partner in PA Consulting’s financial services practice and the UK’s former chief financial ombudsman, says while banks and financial institutions are responding to the new regulations, “there is still a long way to go and this is not a one-and-done thing”. 

Understanding your customers’ needs in times of crisis

The prolonged effects of the cost of living crisis in the UK are straining people’s finances, forcing households to cut their budgets and prompting people to look for more effective ways to protect their money. 

According to PA Consulting’s survey, only 48% of respondents felt encouraged to make financial decisions and more than half say there is too much technical information to keep track of. Almost half of respondents said there are too many financial terms they do not understand, and 35% do not know where to find reliable financial updates.

Almost 80% of survey respondents want providers to take responsibility for providing unbiased and accurate guidance to help them manage their money, and a similar number want help to learn about inflation, budgeting and investing.

Ms Wayman says banks can help vulnerable people and marginalised groups access better products and services and help them feel financially empowered by learning more about their personal needs. “Gathering information on your clients and helping them feel comfortable is part of the answer, but banks should work on designing brilliant, straightforward and easy-to-understand products that are accessible to everybody,” she says. 

Aside from a lack of clarity in financial services, which is preventing people from obtaining competent skills to better manage their money, UK customers do not trust institutions outside of their bank or personal network to help them navigate the market. According to PA’s survey, 76% of respondents are more likely to trust financial advice they receive from friends and family. Only 67% said they trust the banks they currently bank with. 

“One of the biggest challenges for the financial sector is to have people engage with banks and have them come forward when they need help,” says Ms Wayman, who adds that past crises have exacerbated the level of trust that people put in financial institutions. “The consumer duty will help ensure good outcomes for people, but financial institutions should be more open to receiving complaints because they are an opportunity for feedback and a chance for banks to engage with their customers,” she says.

Can AI help smooth communications?

Although artificial intelligence (AI) can help with customers’ queries and allow them to access information through different channels, according to PA’s survey, only 16% of respondents would use AI as a tool to access personalised financial advice. 

“It is not surprising that people are distrustful of AI because they are still unfamiliar with the technology,” says Ms Wayman. “AI is brilliant at recognising patterns and doing things really quickly, but a conversation between people and banks needs to happen in order to build trust in the technology.” 

While AI undoubtedly comes with its fair share of risks, it also brings massive opportunities for financial institutions. “Oftentimes, people think that unconscious bias is something that belongs only to AI, says Ms Wayman. “But it’s important to emphasise that humans also have a lot of unconscious bias. In some cases, AI could actually reduce the risk of bias in decision-making, by designing out human subjectivity.”