Banks need to shift from reactive to proactive support over the next year

Amid economic uncertainty it has never been more important for banks to offer proactive and practical help and support for their customers. At this time, Quadient has identified three key trends for 2023 that are vital for banks to help consumers overcome increasing economic pressures and maintaining excellent customer communication.

Uncertain economic conditions create worry and stress for consumers, which is only going to intensify over the next year. Banks often ‘talk the talk’ about being ‘on the side’ of customers, but now is the time for them to ‘walk the walk’, as people across the UK look set to struggle with their finances in a way we’ve not seen for decades. Most of them have the right ingredients – digital systems and access to an ever-widening stream of customer data. But now is the time to step up and put it to use, proving just how valuable a role banks can play in helping households navigate a path through the storm that looks set to hit in the next year.

Stepping up support from reactive to proactive

Everyone will be feeling the pinch next year, so it is vital for banks to shift to proactively helping their customers, steering them away from potential threats in advance. At the moment, most high street banks offer support to customers who tell them they are struggling. That’s a great first step, but next year they’ll need to take a more proactive approach – not everybody feels comfortable coming forward, or even realises they are in trouble. Banks need to proactively seek out customers who are likely to struggle and offer advice and help in advance. For example, if they look at monthly outgoings, it’s possible to warn customers that may struggle to pay their bills when the Government adjusts its support package from March onwards. This proactive approach gives the customer time to adjust and prepare, before the problem hits.

When providing advice and assistance, banks need to keep in mind that the recession playbook has changed since the last big non-bank caused crisis in the 1990s – consumers demand a much higher standard of living these days. For instance, while in the 1990s satellite TV packages were considered a luxury, today streaming services are an expectation for a large majority of the country. Advising customers to cut back on this kind of outgoing is no longer such a feasible piece of advice as it was a few decades ago. The banks that help people the most over the next year, educating them on how they can save money in the current climate, will be rewarded with a loyal customer base.

Banks that can segment their customer base will meet their duty of care

In recent months we’ve seen mortgage rates climbing steeply, which has a huge impact on many customers. This type of news has to be delivered in a personalised, considered manner – and with banks likely to have more bad news to impart as a recession takes hold, the way they share it will become increasingly important.

Banks cannot continue communicating how they do now, simply telling customers that prices are increasing or rates are changing. Banks need to dig deeper, and consider the potential impact that these changes may have on individual customers.

This means that banks’ ability to segment their customer base is going to become much more important next year. Previously, they had only really thought about different segments for their own use, but now it’s become crucial for customers. But this doesn’t just mean giving the customer a discount off their payments, it’s about supporting them as they make these payments. Banks can do this by helping customers to understand what’s happening to their finances and why. It’s absolutely vital that banks understand where their customers are right now, and how they can support them.

Those not helping customers will fall foul of tightening regulation

The customer experience bar has been raised in recent years, and consumers’ expectations aren’t going to stop any time soon. Government is now also starting to say that enough is enough; businesses need to put the customer first. This change is beginning with the Consumer Duty, which ensures that organisations are providing customers with the best possible outcomes. This means that for those customers who may be struggling, banks need to be offering products with the best interest rates or more flexible overdrafts. Banks have until July to get their house in order.

Customer data has an absolutely vital role to play in helping banks understand the situation that their customers are in, and the service that suits them best. Next year, we’ll start to see more legislation and regulations that force financial organisations to be truly customer-centric. This adds an extra incentive to do everything within their power to help customers – failing to do so risks the customer base shrinking, or regulatory action.

Andrew Stevens, Principal, Banking and Financial Services at Quadient