Banks failing to meet new Consumer Duty obligations when communicating with customers, Quadient and Signal research finds

The Financial Conduct Authority (FCA)’s New Consumer Duty demands that regulated industries enable consumers to make informed decisions about financial products and services. Yet UK banks are still potentially open to a wave of Consumer Duty complaints thanks to communications confusion, research from technology company Quadient (Euronext Paris: QDT) and Signal has revealed.

In a survey of UK banking customers*, only 8% of respondents could correctly identify what they would be charged when presented with a standardised letter on changes to overdraft charges. This was despite 39% claiming a high level of knowledge on financial matters, and 53% saying they had a high understanding of communications from banks.

With every single respondent either currently using an overdraft or expecting to, and with the average respondent’s overdraft at £484, clear communications from banks will be critical. Not only to help customers avoid unnecessary charges, but to meet the FCA’s demands to give consumers the information they need, at the right time, and presented in a way they can understand.

“Clear communication is a critical component of modern banking, and never more so than during a cost-of-living crisis,” said Andrew Stevens, Principal, Banking and Financial Services, Quadient. “Banks need to not only share relevant, timely and understandable information, but make sure that it is being read. This means choosing a channel that presents information clearly, and that you can be confident customers will read, as well as sending the right message at the right time to ensure engagement. Without this, banks will be inviting complaints and failing the FCA, their customers, and ultimately themselves.”

Consumers are clear about what communications are most useful for them. Asked how they prefer to receive communications from their bank, 36% said emails to their personal email address, and 34% opted for letters in the post. Respondents were also clear that out of the different communication options available, they saw emails as the easiest to understand.

Knowing these preferences should make it easier for banks to ensure they are using the right communication channels, but that isn’t necessarily the case. 43% of respondents said their bank “never” or only “sometimes” communicated with them over their preferred channel, suggesting banks are ignoring or ignorant of customers’ preferences. There is also the question of ensuring communications are timely. When asked about changes to their account, 83% of respondents wanted warnings about any proposed changes at least a few weeks before any changes took place, and 63% at least a month in advance.

The right approach to communications is important, and this means personalisation and avoiding a one-size-fits-all mindset for different demographics. The research showed clear differences between age groups, including:

• Over-55s claimed to have the least knowledge of financial matters, while 35–54-year-olds were least likely to understand changes to overdraft charges; suggesting both groups need more targeted, clear communications on these issues.
• 61% of over-55s “sometimes” or “never” receive communications via their preferred channel, suggesting banks need to do more to understand these customers’ preferences.
• 22% of under-35s preferred to receive communications via their banking applications – the highest of any age group, and evidence that banks should use newer communication channels with these customers.

“Banks need to help every single customer make informed financial decisions,” continued Andrew Stevens. “Banks need to re-examine what is “reasonable” when contacting customers, and ensure they are asking the right questions – are their communications clear? Are they personalised? Are they using the best channel for the customer to read and understand messages? And is that message being delivered in a timely manner? This is a stressful time for banks and their customers, but following the New Consumer Duty will help increase customer satisfaction and reduce the risk of complaints.”

Quadient, Signal and selected guests are discussing the results of the research and the need for the New Consumer Duty in a live webinar on 25th May, at 3:00pm BST. To find out more, register, and receive a free copy of the full report, visit here.

*Survey of 402 UK adults was performed by 2CV Research in Q2 2023.