Some of the measures that were introduced by banks to help customers through the Covid pandemic need to return as the cost-of-living crisis tightens its grip, according to a new report from Johnston Carmichael.
The Aberdeen-based accountancy firm carried out research into the “positive impact” of banks’ customer support during the pandemic.
And it teamed up with Fair4All Finance, a UK Government-backed, not-for-profit organisation which strives to improve access to affordable credit, to produce the final report.
Pandemic lessons
The document – Banking response to Covid-19: How the pandemic gives us lessons that
can help people in vulnerable circumstances now – sets out a series of recommendations for banks, building societies and other lenders.
These include:
- Widening credit options to support customers in financially vulnerable circumstances. The report says many customers on low or flexible incomes need access to personal loans of less than £1,000 and which can be repaid within a year.
- Reintroducing an offer of a £500 interest-free overdraft to all customers who need it and where it would be appropriate for their circumstances.
- Providing a wide and flexible support and forbearance offer, including increased use of payment deferrals and interest holidays to customers facing financial difficulties
- Taking further steps to communicate with customers via their preferred channels, using clear language, and carrying out proactive monitoring to spot early signs of financial stress or vulnerability “at a customer level and not just a product level”.
Fair4All Finance chief executive Sacha Romanovitch said: “Banks went above and beyond to help customers during the pandemic without it being detrimental to their results.”
Our report found people overwhelmingly felt that their financial situation was positively impacted due to their bank's support during the pandemic. These measures could be used again to help people cope with financial challenges in the future including the #CostOfLivingCrisis pic.twitter.com/5XystGbUbh
— Fair4All Finance (@Fair4AllFinance) January 13, 2023
She added: “The current cost of living is creating financial pressures for millions of people.
“Banks have a real opportunity to offer tailored and new services to help those in financially vulnerable circumstances. The customer loyalty this can create is an opportunity that must not be missed.”
Anyone can find themselves in need of such help, Ms Romanovitch said, adding: “Circumstances such as ill health, unstable incomes and a lack of savings can all cause financial vulnerability.
“Life events like losing a job, separation or bereavement can put a strain on finances and affect wellbeing.”
Typically at this time of year we look forward and consider what the new year may have in store. Our Financial Services team share their thoughts on what might lie ahead for the banking, insurance, and wealth management sectors in 2023: https://t.co/zelSfunRrK #FinancialServices pic.twitter.com/KqccSckWWS
— Johnston Carmichael (@JC_Accountants) January 3, 2023
Ewen Fleming, partner and head of financial services consulting, Johnston Carmichael, said: “It has been a pleasure to partner with Fair4All Finance on this important piece of research looking at the measures put in place by the FCA (Financial Conduct Authority) and the banking sector during the Covid-19 pandemic and the difference they made.
Banks’ speedy Covid support
“It is particularly pleasing to note the broadly positive reaction from customers who sought support during this period, helped by the speed that support measures were put in place – especially given the scale of the operational challenges that banking institutions faced during the first lockdown.
“Ultimately, the report’s recommendations will be to the future benefit of customers in financially vulnerable circumstances.”
Johnston Carmichael’s research included banking and consumer surveys.
Lloyds Banking Group, NatWest Group and Yorkshire Building Society also took part in the project.
The aim was to understand the impact of support measures like payment holidays and interest-free overdrafts on customers and the financial institutions themselves.