Many customers are suffering right now with high inflation and interest rates.

Now, while that is easy to say and observe, it’s often hard to quantify what that means, in practice, and how many customers are being materially affected.

However, over the last couple of years, Financial Conduct Authority (FCA) here in the UK has been tracking consumer financial vulnerability.

Their research found that in May 2022, nearly 13 million or 24% of all UK adults had what they term ‘low financial resilience’, which they describe as being in a state where if they suffered a sudden change in their personal financial circumstances, then they would struggle to pay their domestic bills and meet their credit commitments.

Alarmingly, this number has increased by over 2 million adults since their February 2020 Financial Lives survey.

This is not surprising, given the effects of the pandemic and the significant increases that we have seen in the cost of living over the course of 2021, 2022 and through into this year.

But, these numbers only account for those customers that are financially vulnerable. If we take into account the FCA’s four drivers of vulnerability (poor health, recent negative life events, financial resilience and low capability), then the number of vulnerable UK adults rises to nearly 25 million or 47% of the adult population.

That’s a big number.

In response to this and what is being labelled as “one of the biggest-ever shake-ups of consumer finance in the UK”, the FCA is introducing on the 31st July of this year new rules and guidance (Consumer Duty) for banks, building societies, insurers, investment firms, and many other businesses that fall under its purview.

These rules will require firms to act to deliver good outcomes for retail customers covering products and services, price and value, customer understanding and customer support.

Moreover, the FCA’s new rules will “require firms to consider the needs, characteristics and objectives of their customers – including those with characteristics of vulnerability – and how they behave, at every stage of the customer journey. As well as acting to deliver good customer outcomes, firms will need to understand and evidence whether those outcomes are being met.”

So, what does that mean for customers?

Well, let’s say, for example, a customer wants to switch to a new product but faces a large exit fee if they do so. That fee would now fall foul of the FCA’s new rules.

Or, for example, let’s say a customer wants to cancel a product but is told that to do they have to physically go into a branch. That requirement would now also breach the FCA’s new rules.

In addition, customers can also complain if they think they have not been fairly treated under the new rules. And, if the FCA finds that there was unfair treatment or risk of harm to a customer, then the offending firm can expect robust action in the form of interventions, investigations or possible disciplinary sanctions.

It’s not yet clear what those interventions or sanctions may look like, but to give some context, the FCA has levied nearly GBP1.5 billion ($1.87 billion) in fines over the last five years, with the largest fine for one single organization being in excess of GBP260 million ($324 million).

But, it’s not just the customer’s responsibility to point out where they may have been mistreated. The FCA will also require firms to monitor and report on customer outcomes.

Now, if you consider the number of interactions (calls, emails and messages etc) that a bank or other financial service institution will have with their customers on a daily, weekly or monthly basis, then monitoring and assessing all of those interactions is a massive job.

I spoke to Darren Rushworth, President of NICE International, to better understand what this means for financial service organisations.

He told me that traditionally when new regulations come into place, firms often rely on employees, consultancies or suppliers, employing hundreds of people, to go through all of their calls to assess whether they have adhered to the guidelines or not and if any remedial action needs to be taken.

That is a very costly exercise, which, in itself, is often a real disincentive against any meaningful change with some firms often happier to pay fines rather than make any changes to the way they do business.

But, when it comes to the new FCA regulations, Rushworth believes things are different and that “It’s actually going to be very, very difficult for organizations to implement these regulations, especially when it is people that are involved in deciding whether something is compliant or non-compliant.”

He illustrated this using an example of a UK insurance firm who, relying on their own practices and best efforts, were only able to identify 20% of the customers who would be considered vulnerable according to the FCA’s new consumer duty of care.

In response to these changing requirements, NICE have developed and built into their Enlighten AI analytics platform a series of analytical models that have been trained and tuned specifically to analyse and highlight interactions with vulnerable customers.

This allows them to automatically score and classify every interaction, better understand where action needs to be taken to ensure compliance, provide real-time guidance for agents when dealing with customers and uncover underlying product, process or skill-based issues that are drivers of vulnerability and complaints.

The previously cited insurance company have recently implemented NICE’s Enlighten AI for Vulnerable Customers analytics solution and, over the course of just a few weeks, they have increased their ability to identify vulnerable customers from 20% to 80%. Moreover, that number is improving all of the time, and they are now only deploying human beings now to look at the most serious cases.

The moral of the story, according to Rushworth, is that “treating your consumers with a fair and reasonable duty of care is impossible to do with any level of confidence without technology.”