By Jane Asscher, CEO and Founding Partner, 23red.
A decade on from the global financial crisis and “the world is sleepwalking towards a fresh [one] that will have devastating consequences,” according to the former Bank of England governor, Mervyn King.
Since 2009, some lessons have been learned. Out of the ashes of the credit crunch appeared the likes of N26, Monzo, and Starling, the disrupters that promised banking would be different. And for a time,it was. Our faith in technology was unwavering and we believed that it could unlock a new financial system.
But no sooner than customer trust was on the rise, fresh concerns appeared within the sector. A frightfully volatile cryptocurrency market led by Bitcoin attracted masses of speculative gamblers and left many empty-handed. Then, as FinTech continued to draw investment, questions emerged regarding technological bias in banking.
In November, the algorithm used to set credit limits for the new Apple Card came under fire amid claims of gender discrimination. David Heinemeier Hansson, the Danish programmer and creator of the Ruby on Rails web development framework, announced on Twitter that he had been offered 20 times more credit than his wife. Steve Wozniak, co-founder of Apple, replied “The same thing happened to us. I got 10x the credit limit. We [me and my wife] have no separate bank or credit card accounts or any separate assets.” Wozniak and Hansson were simply offered more for being male.
This follows widely publicised reports that many artificial intelligence systems have been engineered with racial and gendered biases built in.
Now, financial expert and head of the Financial Inclusion Centre, Mick McAteer, claims that advances in banking technology are putting vulnerable customers at risk of discrimination. He claims that lenders and insurers are gaining access to tools to more accurately identify “unprofitable” or costly customers, increasing the risk of exclusion for certain sections of society; namely the elderly, disabled or those with learning difficulties. Add to this the challenges of the 1.2m unbanked who are paying a banking poverty premium because they are missing out on discounts and preferential rates and the 40% of the working people suffering with financial worries and the knock on impact on levels of stress and depression and there is a crisis in financial wellness looming.
Such claims and statistics are worrying and threaten to undermine a generation of disruptive FS brands. The evolution of banking technology must not reflect societal prejudices or become a socio-political tool that gives benefits to the wealthy. In fact, FS brands should lead the charge in ensuring all customers are treated equally by technology and rising to the challenge of improving the financial wellness. Many consumers left disenchanted by banks following the financial crash of 2008 were won over by the equality and perceived morality of the challenger banks. If challenger banks allow technological bias to discriminate and prey upon certain sections of society, their position in the market will collapse. The ease of payment, investment, or wealth management via apps are no longer USPs because the incumbent banks have simply developed their own equivalents. Therefore, morality, ethics and purpose have become vital selling points.
As an agency that specialises in delivering purpose-driven campaigns for government departments, charities and brands, we have developed a deep understanding of vulnerable audiences. We have adopted behavioural approaches to support these varied and nuanced audiences, ensuring that complicated messages are delivered in a simple, salient way. For NEST we developed a brand strategy, name and identity for Personal Accounts which simply and clearly communicated that it was about retirement savings while building trust and credibility.For HMRC we have helped parents understand the value of saving for their children’s future, start thinking about where they feel comfortable saving, simplified the options and increased confidence in opening an account.
While Monzo has pledged to give bank accounts to vulnerable groups and recently partnered with The Big Issue and Starling have a “vulnerable customers team who look after those customers who need extra support a but there us more to be done to build financial capability and help people manage what money they have responsibly
The opportunity is for challenger banks to make themselves indispensable to and trusted by their customers by adopting a behavioural approach to helping them manage their money. Consumers that feel supported by their FS provider and remain in good financial health will be more loyal and valuable to the brand in the long-term. They’ll value them enough to open new savings accounts and take out loans responsibly, recommend the service to friends and family, and in a technology orientated world, where news and views can go viral within 24 hours, community advocates are literally worth their weight in gold.
If they don’t seize the opportunity, the incumbent banks will always be able to offer added products and services and can ultimately price them out of the market. The challengers must take the high ground and trade on purpose driven initiatives.
To do this they need to support their customers, no matter their background. Drawing on some of the ideas and results from The Financial Capability Lab, there are three ways in which they can do this.
Firstly, their products need to have responsible functions built in. Tools that encourage you to save, advise against over borrowing, night-time spending, or living outside of your means – all things that you are more prone to if you are struggling with mental health issues, addiction, or simply struggling to manage your finances.
Secondly, the tools must be promoted by simple, salient interactive marketing communications that break down the stigma associated with having difficulty managing money, help improve customer comprehension and signpost financial advice and guidance.
Thirdly, by helping people take control (rather than offering them yet more choice); encouraging them to use the tools with timely prompts or nudges to promote savings, restrict spending and seek guidance.
Only by helping everyone to manage their finances responsibly regardless of circumstances will FS brands and the challenger banks help to avert the looming crisis of financial wellbeing, earn back customer trust and improve their own triple bottom line.