Impact testing. Can more be done to address social inequality?

Retail Financial Services

06 October 2022

Bank and Brand Distribution of Retail Financial ServicesClient Data ManagementFinancial EducationFinancial servicesRetail Financial ServicesVulnerable clientWealth

Expert: Tony Crane, Andrew Gething Facilitator: Tony Crane


  1. The finance industry needs to do more to help identify the root cause of inequality
  2. Early interventions are critical in avoiding a spiral into less favourable FS products – leading to greater chance of poor outcomes and over time the reduction in opportunity and the greater chance of inequality
  3. Collecting data on customer characteristics before starting the transaction is a key enabler in making sure customers are treated in the right way
  4. Treating everyone as vulnerable until proven otherwise provides the best foundation to achieving a good outcome
  5. Health & Wealth are seen as the biggest triggers to growth in inequality


Interventions to prevent inequalities building:

The FCA is driving the conduct agenda but PRA have a big indirect influence on equality.

Automated decisioning is likely to increase the number of consumers on the fringes of the market. “Computer says no” culture is still seen to exist.

Speaking to people before they get into debt troubles is really important. The perception is that debt advice firms are too quick to go the IVA route. Once in that process it is very difficult (and lengthy) to recover.

Vulnerable customers:

Fear and lack of trust were identified as big blockers to transparency and honesty between firms and customers in regards to vulnerable circumstances.

Identifying vulnerable customers is recognised as difficult – again the root-cause flagged is the significant gap, data-wise.

There is acceptance that the mainstream FS market will tackle the impact of the vulnerability (product wise) but won’t deal with the root-cause. Whose responsibility is that?

The group agreed that if there was a better value exchange between industry and consumer then disclosure might be less of an issue – customers tell us they have an issue but there is a perception that many firms don’t offer to help beyond the product they are dealing with.

The recent Vulnerability and Consumer Duty regulations seen as main driver for change, which needs to be in place by July 2023.

Avoiding financial exclusion:

Data suggests that ethnicity is as much of a factor as age/location. Why is this?

Are we doing enough to understand what impact risk-profiling is having on different groups within the UK – is there a correlation between level of wealth, geographical postcode you can then afford to live in, and the perceived risk associated with that postcode and ethnicity?

It is clear that socio-economic background plays a key role in determining the chances of becoming vulnerable, as well as financial capability and confidence.

Better/more formal relationships between different sectors would improve support for customers dealing with circumstances that could ultimately lead to greater inequality, such as life events, illness etc

Better relationships between Banks/BS, specialist charities and Credit Unions would be helpful in reducing the chances of people falling through the cracks.

In many cases, health issues trigger financial issues and that starts a spiral. Bank/BS are considered to be poor at handling health-related issues – their product-centric approach is not helping customers deal with their overall circumstances. This leads to poor decisions and increases the chances of exclusions later on.

The question was raised whether charities do enough to refer to FS, such as encouraging they speak with the lender etc. The feeling is that charities would welcome the discussions but find FS can be a difficult relationship to develop. Why is that?

There was acceptance that the regulation does now provide a robust framework for firms to operate within.

However, are firms brave enough to accept the additional responsibility of Consumer Duty, if they are, why haven’t they done it already? If not, what’s going to change?

Improving financial education:

Financial education (or lack of) is widely accepted as one of the causes of inequality. It has been on the agenda for as long as most can remember, but still shows no signs of it improving. Why?

More widespread guidance services are needed, encouraging customers to make more informed choices.

The decline in the standard market is pushing consumers into more expensive products.

Looking at root-cause rather than simple decline data is likely to deliver a more positive customer outcome.

Rather than just issuing a decline letter, can the industry do more to explain why it made the decision, what steps the applicant could take to improve their position and give a timeline for when a fresh application might be considered. The industry will say that we already do this, but do we measure how many actually take this advice, and then reapply successfully?

There was recognition that the regulator is working towards providing more structure around how to offer ‘guidance’.

The removal of staff from branches has left a big gap in terms of how far vulnerable customers seek support/help.

Digital exclusion is compounding the impact of removing staff from branches – this was seen as one of the biggest challenges going forwards.

Consideration should be given to the role aggregators and online buying sites need to play. They handle a lot of traffic but are consistently absent from discussions around vulnerability and equality.

One argument is that their model has driven consumers to assume ‘price is king’, rather than educate themselves on the benefits/risks of each option.


Ethnicity data and the impact that is having on good financial outcomes should be researched more thoroughly – this was a significant concern for the group.

Clear pathways should be developed between Banks/BS, charities and Credit Unions to ensure that as many customers as possible avoid going into debt spirals with IVA’s or sub-prime credit as a result of life events or poor financial decisions.

Better/more formal relationships between different sectors would better support customers dealing with circumstances that could ultimately lead to greater inequality.

The government needs a plan to finally tackle the issue of financial education – do we need a state backed FS brand of some sort to solve this and underwrite some of the risks? Consumer avoiding sub-prime products should be an objective for us all. Is this on the levelling up agenda? Which minister is accountable?

The continued drive towards fully automated/digital is leaving the most vulnerable behind – do we want that as our collective legacy?

Owen James should consider running this session at all events to gain a perspective from the entirety of the FS market. Once completed, present findings and consider publication and political engagement thereafter, could even include a white-paper on tackling social inequality.

Key takeaways:

  • Assuming everyone is vulnerable until data is obtained otherwise is a much healthier approach to tackling vulnerability
  • While the move to digital is itself creating more inequality, digital solutions are also the only realistic way to manage health and lifestyle data to solve the inequalities
  • Consumer Duty regulations should make a bigger impact on reducing social inequality