Firms missing commercial opportunities by treating vulnerability as a regulatory requirement

Financial services firms risk missing significant commercial opportunities by treating customer vulnerability solely as a compliance issue, according to MorganAsh.

The introduction of Consumer Duty in 2023 increased emphasis on identifying and responding to customers in vulnerable circumstances. While some firms may view this as additional overhead or oversight, MorganAsh urges firms to consider that there is significant commercial value in understanding more about their customers’ characteristics of vulnerability.

The support services provider argues that better customer insights can help firms make more informed decisions, improve personalisation of products and services, and engage with customers before their circumstances deteriorate.

The latest data from the Money Advice Trust puts the annual household spending power of the UK’s 16 million disabled people at £446 billion, while 75% of disabled consumers believe businesses are losing out due to poor accessibility. "There are real commercial gains possible from simply knowing more about vulnerable customers, personalising their experience, creating targeted products and simply responding to their personal characteristics", MorganAsh says.

In addition, figures from McKinsey have put the potential revenue uplift from personalisation at around 40%, while other research has found that poor personalisation is a significant driver of customers switching providers.

Andrew Gething, managing director of MorganAsh, said: “We’ve long said that the focus of Consumer Duty and customer vulnerability should be on the carrot and not just the stick. All too often the narrative is around what happens if you don’t, rather than the considerable business benefits of why you should.

“Of course, firms do need to meet the requirements of Consumer Duty, but that is only one part of the picture. There are significant commercial opportunities and clear competitive advantages in understanding customers properly – and using your insights to make better decisions. Whether that means avoiding an unnecessary decline and pivoting to a different product, retaining a customer who might otherwise leave or identifying a need for a new product, better vulnerability data can give firms a much clearer picture of the people they are serving and create real opportunities for greater personalisation.

“Through the combination of technology being readily available and fantastic guidance – particularly from the likes of the Chartered Insurance Institute (CII), customer vulnerability management doesn’t need to be the burden that firms think it is.

“If a firm can proactively identify a customer’s circumstances, understand them properly and use that information appropriately, they have the ability to improve customer outcomes, while making better commercial decisions too. That is a far more valuable proposition than viewing vulnerability as just a compliance cost.”