Jonathan Barrett is the CEO and co-founder of Comentis, a company that specialises in technology for identifying and protecting the financially vulnerable and those at risk, and here looks at the UK motor finance market.
The rate at which cars are being bought on finance shows no sign of slowing, with the average sum borrowed in the UK for a new vehicle shooting up from £11,964 to £25,039 in the space of just 13 years.
With such large amounts being spent, and with the cost-of-living crisis putting household budgets under significant pressure, it’s imperative that potential customers are accurately assessed for any risk of vulnerability before they’re offered a finance arrangement.
For a trained clinician, this is something which could be done manually. But for a sales professional, the overwhelming majority of whom won’t have the same background or expertise, digital tools present the most surefire way of correctly identifying a potentially vulnerable customer.
Why is technology required?
For those lacking an in-depth knowledge of the complex nature of vulnerability, identifying at-risk customers will prove an incredibly difficult task without technological support.
For instance, it’s easy to assume that if, on paper, someone can meet the terms of a proposed finance arrangement, they aren’t financially vulnerable. This is especially true when we’re talking about a high-value item such as a brand-new car. But it’s this misconception that leads to vulnerabilities going unidentified when customers are assessed without the proper tools. In some cases, it even leads businesses to believe that they have no vulnerable customers.
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Vulnerability could just as easily stem from illness, divorce or low resilience – triggers that have all been defined by the FCA – than from a threat to someone’s income or their suitability for credit. It’s the emotional, mental and cognitive response to these circumstances that leaves someone vulnerable, and as such, they must all be correctly identified. Not only to protect the interests of the business but with potential sanctions soon to be in store for those who aren’t, to ensure good outcomes for those at risk.
An additional challenge, which can be particularly difficult to overcome without a digital assessment, is the very real sense of shame that surrounds the idea of being vulnerable. Our natural response is often to deny or refuse to discuss it. Many who are at risk may not even realise it.
So while it might fall to a sales professional to identify which customers are at risk – indeed, under the FCA’s incoming regulatory requirements, to demonstrate that they are doing so in each and every case – the reality is that we simply can’t expect them to consistently do so without some kind of digital support.
How technology can help
Over the past few months, the FCA has published plenty of information on supporting vulnerable customers, updating this regularly in response to questions from the community and writing to specific sectors with more detail. Likewise, various industry bodies have published their own support guides.
But training alone simply won’t be sufficient. As we’ve seen, identifying vulnerable customers is best approached with a third-party specialist platform.
A digital assessment, capable of accurately identifying financially vulnerable customers, removing subjectivity from the process and ensuring consistency across a whole client base, is arguably the only way to ensure all vulnerability drivers are constantly in scope. By combining clinical expertise with hard data, they’re able to reassure firms that their systems and controls will adequately meet the scrutiny of regulatory requirements. Perhaps most importantly, however, they remove the need – and indeed the pressure – for those offering finance to correctly identify vulnerability with only their own insight.
In the long run, this process will benefit everyone; customers and businesses alike. If you’re struggling, or if you know that you need to bring in additional expertise, don’t delay. The tools are out there to deliver the support you need.