Ellie Engley is account director at REaD Group
In the current climate, the cost of living crisis is a real challenge for financial services companies who need to be able to support their vulnerable customers. One in six (17%) of UK households (4.4 million) are now in ‘serious financial difficulties’, compared to one in ten (2.8 million) in October 2021 – an additional 1.6 million households – according to research from Bristol University, while it was recently reported that one in five adults across the UK – nearly 11 million people – have fallen behind with at least one household bill payment.
As a financial services provider, it has never been more important to be able to identify and communicate appropriately with vulnerable customers; those who, due to their personal circumstances, are especially susceptible to detriment. Not only that, but there are three different levels of poverty to be aware of: ranging from income below minimum income standard, not enough income and destitution.
As a financial service provider, then, it has never been more important to communicate sensitively to customers, price products appropriately and protect customers from fraud.
Identifying vulnerable customers
As a responsible brand, the first step is to proactively identify vulnerable customers to exclude from particular direct marketing campaigns, where additional credit or non-essential purchases could increase the pressure on their personal circumstances. This is an ethical approach to direct marketing which also sees companies increase ROI and improve campaign success.
Using both internal first party and third party data, it is possible to build up a detailed picture of customers in order to identify the existing vulnerable groups, as well as the emerging vulnerable groups within your customer base.
This data can identify vulnerable and potentially vulnerable segments of consumers, including self-declared vulnerability or that shared by a first party, such as a bank, on behalf of the consumer, along with high-cost short term credit applications; houses of multiple occupation (HMO data); and consumer vulnerability metrics. This latter employs a segmentation model which takes into account census data to provide information on demographics, such as age, income, housing, education, financial products, affluence measures; transient states such as health; market forces acting on the consumer and their susceptibility to those forces; and the individual’s market preferences.
Taken together this data will provide a rich and detailed understanding or levels and types of vulnerability so brands are able to work with their customers responsibly. Gaining a better understanding of differing vulnerable segments in a customer base helps drive effective communication strategies, while simultaneously ensuring fair treatment.
Other warning signs
Changes in transactions and behaviour are another way to identify vulnerability in customers. It may be necessary to identify different segments or groups of customers who are classed as vulnerable for different reasons. Those consumers who were once deemed ‘financially stable’ now feel financially stretched and are at greater risk of financial vulnerability through increased cost of living and rise in inflation.
The use of third party datasets can also support the identification of these groups which provide information on changes in personal circumstances, short-term finance requirements, loss of income or employment and changes to relationship or residential status.
Using external data variables helps companies make data-driven decisions on how to price products, reduce fraud, identify vulnerable customers and ultimately make more personalised decisions using data. Data can be used across different teams, including marketing, fraud and pricing, for multiple purposes and projects.
Being able to supplement the data they hold on a customer can help marketing teams to not only help identify risk but help define what their need state actually is, whether that’s saving, moving house or having children. Enhancing customer data helps companies make better informed decisions.
Keep it clean
On top of this, every financial services provider should be keeping their consumer data clean and accurate. Data that is up to date will help businesses make more informed and responsible decisions about how they communicate with customers and prospects.
Above all, financial service providers should be mindful of the many more people who are now vulnerable, and communicating with care should be a brand’s mantra for the foreseeable future.
Ellie Engley is account director at REaD Group, a Sagacity company, which uses its data products, insight and expertise to help its clients get closer to their customers.
 of UK households (4.4 million) are now in ‘serious financial difficulties’, compared to one in ten (2.8 million) in October 2021 – an additional 1.6 million households – according to research from Bristol University, while it was recently reported that one in five adults across the UK – nearly 11 million people – have fallen behind with at least one household bill payment.){kind=link}