By: Dexter Penn, CEO Kalgera.

While lockdown restrictions may have eased, the effects of the Covid-19 Pandemic will continue to be felt for many years to come.

Alongside the devastating impact the pandemichas had on the physical health and mental wellbeing of people across the world, is the continued impact on the livelihoods and personal finances. Faced with uncertainty, extended periods of being out of work, living on the reduced wages of furloughor the constant threat of redundancy is taking its toll on the health of the nation’s personal finances. Covid has exacerbated financial difficulties for many people.

The Financial Conduct Authority (FCA), the financial regulatory body for the UK, has been conducting research into the prevalence of vulnerability to get a better picture of the current problem – and the results are alarming. Its Financial Lives Survey, initially conducted in February 2020 and repeated in October 2020, suggests that more than half (53%) of UK adults are displaying a characteristic of vulnerability – a rise of more than 3 million since February 2020.

20million (or 38%) of UK adults say their overall financial situation has worsened since Covid hit – leaving more people financially and emotionally vulnerable.

Coupled with this, fraudsters have taken advantage of the increase in the number of people using online and digital banking – some for the first time. So much so that Reuters recently dubbed the UK the “bank scam capital of the world”.

While digital uptake and acceleration has its many benefits, it is clear that moremust be urgently done to protect people from online scams.

Recognising the scale of the problem increasingly facing the nation, the FCA issued regulatory guidance for financial institutions’ fair treatment of vulnerable customers earlier in the year. The guidance sets out four key areas for banks and financial services providers to act to better protect customers:

• understand the needs of their target market / customer base;
• make sure staff have the right skills and capability to recognise and respond to the needs of vulnerable customers;
• respond to customer needs throughout product design, flexible customer service provision and communications;
• continuously monitor and evaluate whether they are meeting and responding to the needs of customers with characteristics of vulnerability and make improvements where this is not happening.

The guidance exists to promote and encourage better understanding of the needs of vulnerable customers to better meet their needs and to ensure they are treated fairly. Yet, this requires expert specialist knowledge for which there are very few well defined existing reference points. While some banks have been quick to establish dedicated ‘vulnerability teams’, many do not have the in-house expertise or technical capability.

Given online banking is a relatively new concept, both the signs and needs of vulnerable customers have largely goneunrecognised. Until recently,customers were not identified as vulnerableuntilthey became a victim of financial abuse or another form of fraud.

The fast-changing nature of online scams – coupled with an increasingly complex compliance and regulatory environment – means banks have a lot of catching up to do to protect their customers and comply with the FCA guidelines.

Thankfully, the pace of digital acceleration and advancements in technology means it can also be part of the solution. Using cognitive neuroscience and ‘deep tech’ data science it is possible to interpret financial behaviourcaptured in transaction data. This process gains unique, personalised behavioural insights and automatically self-improves using Artificial Intelligence (AI) techniques. This builds a profile of vulnerable characteristics that can be used to help identify vulnerable customers – prompting an intervention before it’s too late.

If used by financial services providers, technology solutions can help them comply with – and even surpass – regulatory guidelines, including those issued by the FCA. It also helps them improve customer service, which in turn builds trust and loyalty.

Rather than face the painstaking task and associated cost and resources required to build in-house tech capabilities, financial services providers can look to existing Software as a Service (SaaS) platforms that can be integrated into their own systems.

The ‘plug and play’ concept means tech solutions can run on the existing infrastructure of banks and building societies, therefore benefiting from the same level of safety and security, giving banks and their customers added peace of mind. Subscribing to such services would also reduce the need to recruit specialist talent to build and manage the system while saving costs and increasing efficiencies.

A model in which technology solution providers, medical researchers and financial institutions collaborate, rather than compete, has the potential to benefit from the pooling of different skill sets and disciplines with the collective goal of detecting and protecting more vulnerable people.

To halt progress on the UK’s ticking time bomb of vulnerability, industries must come together to design, build and share technology for the greater good – while striving to be one step ahead of those that seek to use it to do harm.