The Spotlight on Customer Vulnerability December 2020 report commissioned by the Customer-Owned Banking Association (COBA) and conducted by EY revealed that 29 per cent of the population have experienced vulnerability.
The survey of over 2,000 banking customers during September and October, which aims to better understand the increasing prevalence of vulnerability among customers and the everyday experience of these vulnerable customers with their banking institutions, also found that over 50 per cent of people identify with at least one vulnerability risk factor.
While 34 per cent of all respondents indicated a single risk factor, 18 per cent said they were impacted by multiple risk factors.
The most prevalent vulnerability risk factors include mental health (14 per cent), serious or permanent health issue (13 per cent), experiencing trauma in the last 12 months (11 per cent), and having difficulty understanding financial information (7 per cent).
Three in five who have experienced vulnerability have difficulty understanding financial information and have difficulty with the English language.
In addition, 17 per cent of the general population needed assistance from banking providers for a personal or difficult situation, including being stood down from work and unable to afford mortgage repayments, or assistance with deferring mortgage repayments because a source of income ceased due to the coronavirus pandemic.
Over half of all respondents (57 per cent) with a mental illness said they have experienced vulnerability.
Furthermore, when compared with those not experiencing vulnerability, those who experience vulnerability are two and a half times more likely to report that their mental health has deteriorated since the start of the COVID-19 crisis.
Meanwhile, 70 per cent of people who have experienced vulnerability have experienced domestic and family violence, while 70 per cent have experienced financial abuse, and 72 per cent have faced insecure or unstable accommodation.
Commenting on the research, COBA CEO Michael Lawrence said: “Our research shows the alarming complexity and prevalence of vulnerability spurred on by COVID-19.
“People experiencing vulnerability were more than twice as likely to be concerned about their health, and almost three times more likely to report having had their personal relationships suffer or feeling unsafe in their home since the start of the pandemic.”
The report also examined how financial institutions have been responding to customers experiencing vulnerability, and found that across all banking institutions, customers experiencing vulnerability were more satisfied with their institution than non-vulnerable customers.
Customer-owned banks v other banks
The survey found that customer-owned banking institutions rated 21 points higher than other banking institutions when it came to vulnerable customer satisfaction (97 per cent and 76 per cent, respectively).
However, the report also found that across all banking institutions, respondents consistently rated their provider higher on “traditional” aspects of customer service such as being respectful, approachable and friendly, than on more relational “soft skills” such as showing empathy, sensitivity and compassion.
The survey found that customer-owned banking institutions’ customers were more likely to see their banking institution as looking after them and much more likely to report that their main financial provider is “a banking institute I recommend to others” (80 per cent), compared with customers of non-customer-owned banking institutions (58 per cent).
The report recommended that financial institutions should expand traditional frameworks for customer service to include more relational aspects of empathy and compassion.
Speaking about this trend, Mr Lawrence said: “It’s encouraging to see banking institutions doing well in responding to customers in vulnerable circumstances, and it would be remiss of me not to highlight customer-owned banking institutions.
“Our members outscored other banking institutions across the spectrum of customer perceptions, including empathy, sensitivity and compassion. These soft skills are fundamental qualities of customer service in our sector, and highlight the relationship focus of the customer-owned model.”
Dominic Thurbon, a partner in EY Australia community impact team, said that there has been a “quite explosion” in activity in the customer vulnerability space in the last few years.
Commenting on this, he said: “Vulnerability can often show up where you don’t expect it. Normally, we look for vulnerability by looking for the risk factors that are associated with it, but nearly one in four (23 per cent) of those experiencing vulnerability did not associate with any of the normal risk factors.
“As a result, more and more organisations are starting to ask themselves how they can best look after their most at-risk customers, and this study highlights why that is so important.”
[Related: Home ownership listed as a top goal: survey]
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Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.
Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.