Banks and building societies should compete with each other to offer the best set of tools and services to help customers address financial problems that were worsened by the pandemic, a think-tank says.
The Social Market Foundation said that new “consumer duty” rules being introduced by the Financial Conduct Authority should drive financial services firms to improve the way they offer support to customers facing financial difficulties.
The SMF found that some households and small businesses had exhausted their financial reserves during the lockdown years, adding new urgency to the need to rebuild their financial resilience.
The SMF analysis of financial resilience after the pandemic comes in a briefing paper sponsored by the Current Account Switch Service (CASS).
The paper, based on evidence from charities, experts and industry insiders, said that banks and building societies are better-placed than any other organisations to know when people are at risk of getting into financial trouble, and to offer tools and services to help.
That means apps and tools giving customers the ability to make spending plans, forecast cash flows, automatic saving functions, and expenses categorisation.
Banks and building societies can do more to support vulnerable customers, but they need to think beyond their traditional product offer and create new reasons to switch. For people with limited deposits, the prospect of a higher rate of return on savings from switching bank offers little appeal.
Yet these same customers could benefit from tools that can help them better manage their finances.
Outcomes for financially vulnerable households could be improved, and more customers may consider switching provider, if banks compete more in the financial wellbeing space, rather than on conventional measures such as interest paid on deposits and overdraft rates.
Scott Corfe, SMF Research Director