The clock is ticking. The much-vaunted FCA New Consumer Duty comes into effect at the end of July.
The regulations demand that regulated industries enable consumers to make informed decisions about financial products and services. Yet UK banks are still potentially open to a wave of Consumer Duty complaints. This is thanks to communications confusion, according to research from technology company Quadient and Signal.
For example, only 8% of respondents could correctly identify what they would be charged when presented with a standardised letter on changes to overdraft charges.
This was despite 39% claiming a high level of knowledge on financial matters. Moreover, some 53% said they had a high understanding of communications from banks.
Bank communications on charges is critical
Clear communication is essential not just as a result of helping customers to avoid unnecessary charges. The requirement is essential to meet the FCA New Consumer Duty. The average respondent using or expecting to utilise an overdraft had an overdraft of £484.
“Clear communication is a critical component of modern banking. This has never been more the case than during a cost-of-living crisis,” said Andrew Stevens, Principal, Banking, Financial Services, Quadient.
“Banks need to not only share relevant, timely and understandable information, but make sure that it is being read. This means choosing a channel that presents information clearly, and that you can be confident customers will read, as well as sending the right message at the right time to ensure engagement. Without this, banks will be inviting complaints and failing the FCA, their customers, and ultimately themselves.”
Channel preferences for communication
Consumers are clear about what communications are most useful for them. Asked how they prefer to receive communications from their bank, 36% said emails to their personal email address. Some 34% opted for letters in the post. Respondents were also clear that out of the different communication options available, they saw emails as the easiest to understand.
Knowing these preferences should make it easier for banks to ensure they are using the right communication channels. But that is not necessarily the case. 43% of respondents said their bank “never” or only “sometimes” communicated with them over their preferred channel. This suggests banks are ignoring or ignorant of customers’ preferences. There is also the question of ensuring communications are timely. 83% of respondents wanted warnings about any proposed changes at least a few weeks before any changes took place. 63% wanted notice of at least a month.
The right approach to communications is important. and this means personalisation and avoiding a one-size-fits-all mindset for different demographics.
Clear differences between age groups
Over-55s claimed to have the least knowledge of financial matters. Meantime, 35–54-year-olds were least likely to understand changes to overdraft charges. This suggests both groups need more targeted, clear communications on these issues.
61% of over-55s “sometimes” or “never” receive communications via their preferred channel. This suggests banks need to do more to understand these customers’ preferences.
22% of under-35s preferred to receive communications via their banking applications – the highest of any age group. Clear evidence that banks should use newer communication channels with these customers.
“Banks need to help every single customer make informed financial decisions,” added Stevens. “Banks need to re-examine what is “reasonable” when contacting customers. They must ensure they are asking the right questions – are their communications clear? Are they personalised? Are they using the best channel for the customer to read and understand messages? And is that message being delivered in a timely manner? This is a stressful time for banks and their customers. Following the New Consumer Duty will help increase customer satisfaction and reduce the risk of complaints.”