The UK’s Financial Conduct Authority (‘FCA’) has published its report into the impact of various methods used by banks to help their customers manage their current accounts.
The FCA found that detailed annual summaries sent to customers in relation to their current accounts often did not help customers manage their accounts, avoid unauthorised borrowing or switch between providers. This is despite the fact that many banks have been sending such summaries out to customers for a few years as a direct result of regulatory and governmental pressure to be more open and transparent.
By contrast, the FCA found that the use of text messages and banking apps did reduce the levels of unauthorised borrowing. In fact, in cases where customers used both text alerts and app, there was a 24% reduction in unarranged overdraft charges. This might not come as a massive surprise. Unlike the annual summaries, a text message is short and to the point. It is also sent to a mobile phone which makes it easier for the recipient to take immediate action wherever they are. What was a little more unexpected, however, was that the group which appeared to benefit most from the texts and apps was not the younger customers, who one might think would be more tech savvy and (perhaps unfairly) more likely to mismanage their finances, but actually middle-aged consumers with higher incomes. This is something that banks might like to bear in mind when deciding how best to target their mobile services to customers.
It will be interesting to see what the FCA does with the findings, particularly in the context of the potential Competition and Markets Authority investigation into current accounts. Based on a speech given by Martin Wheatley of the FCA to Money Advice Scotland, the next steps from the FCA might include looking further into issues such as:
- ensuring that annual summaries are concise enough to be useful and include clear action points for the customer, such as what they need to do to prevent further charges for unauthorised overdrafts;
- having opting out of text alerts (as opposed to opting in) as the default option for customers with a history of financial difficulty; and
- the somewhat general concept of ensuring that banks use technology to improve customer outcomes.
What much of this boils down to are the familiar messages of the need for transparency and ensuring that any communications with consumers make it easy for the consumer to work out what action they need to take as opposed to becoming little more than white noise, drowning the consumer in lengthy disclosure. It is important that banks consider carefully what they want to achieve out of any communications with their customers and whether the communications do, in fact, achieve those intended outcomes.
Client Alert 2015-062