Over 20% of Brits are 'financially vulnerable', according to research

A recent study conducted by financial technology firm Tink reveals that many Britons are "financially vulnerable" due to the persistent cost-of-living crisis. Of the respondents surveyed, 23 per cent were considered financially vulnerable, with their salaries no longer covering their basic expenses. Over half of these individuals anticipate further reductions in their disposable income in the next year, leading to missed payments and difficult decisions.

The report highlights the need for financial institutions to assist vulnerable clients while fulfilling their regulatory obligations. With one in two "financially vulnerable" respondents calling for greater support from banks during these tough economic times, institutions are under increased pressure to prioritise the needs of their customers and deliver better outcomes.

Over half (58%) of those deemed "financially vulnerable" believe that financial services should be more widely available, with 43 per cent expressing a desire to learn more about managing their finances. There is a definite need from customers for greater assistance due to the increased expectations for businesses to prioritise their customers' requirements and produce better results.

Furthermore, the survey revealed that 45 per cent of respondents would switch to another financial institution if it offered better deals or opportunities to save money. If another bank offered them the specialised financial assistance they require at this time, an additional 37 per cent of customers would switch.

Innovations in data and digital financial services driven by open banking give institutions the chance to get to know their clients better and help them navigate challenging economic times while still fulfilling regulatory requirements.

Tasha Chouhan, UK & IE Banking Lead at Tink, commenting on the research, said it is evident that those in financial trouble are eager for additional support from banks.

She added that with data-driven financial services, open banking might help financial institutions identify consumers who are in need of assistance and offer them specialised support and interventions.

According to Chouhan, open banking can not only significantly improve the lives of those suffering the most from the cost-of-living crisis, but it also enables financial institutions to comply with stricter regulatory obligations regarding the protection of customers that are vulnerable financially.

As financial institutions continue to face the challenges of the cost-of-living crisis, the survey highlights the importance of prioritising customer needs and utilising innovative digital solutions to deliver better outcomes for all.

The Financial Conduct Authority (FCA) has defined a vulnerable customer as someone who, because of their personal circumstances, is especially prone to harm, especially if an organisation fails to act with the right amount of care. This definition is especially pertinent given the results of the FCA's Financial Lives Survey in 2020, which found that 24 million UK citizens, or 46 per cent of the population, had one or more signs of vulnerability.

In light of this, financial advisors must be vigilant in detecting any indications of client vulnerability, particularly in confirming the client's capacity for giving directions. The FCA has identified severe life events such as loss, relationship breakdown and the acquisition of additional caring obligations as crucial indicators of vulnerability, as well as low resilience and subpar reading, numeracy and digital abilities.

The FCA has advised businesses that vulnerability is a spectrum of hazards that all clients are susceptible to. The presence of susceptibility features heightens the risk, which is connected to four primary sources of vulnerability. These sources include health, which encompasses any ailment or condition that limits one's ability to carry out daily responsibilities; life events such as bereavement, losing a job or retirement; the diminished ability to absorb monetary or emotional shocks silently; low self-assurance and confidence in their abilities to manage finances, and low skills in areas such as literacy and numeracy.