Pandemic lessons can help banks support people through the cost of living crisis and beyond

Research finds the unprecedented support from banks and the regulator significantly helped customers during Covid-19, with no detrimental impact on bottom lines.

Our new report highlights the positive impact of the customer support that banks provided during the pandemic and calls for some measures to be re-introduced or modified to help the 17.5m people living in vulnerable financial circumstances navigate the rising cost of living.

In research conducted with Lloyds Banking Group, NatWest Group and Yorkshire Building Society, we looked at the response of major banks and building societies during Covid-19. The aim was to understand the impact of support measures like payment holidays and interest free overdrafts on customers and the financial institutions themselves.

The research found that many of the lessons learned can support financial institutions in the way they treat their customers and help people in vulnerable circumstances weather current and future financial storms.

‘Banks went above and beyond to help customers during the pandemic without it being detrimental to their results. 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.’

‘We’re really grateful to Lloyds Banking Group, NatWest Group and Yorkshire Building Society for participating in this research. Their responses provided an invaluable contribution to the findings.’

Sacha Romanovitch OBE, CEO of Fair4All Finance

Among the report recommendations are that banks, building societies and other lenders consider:

• Widening their credit options to support customers in financially vulnerable circumstances – many customers who are on low or flexible incomes need access to personal loans that are less than £1k and that can be repaid within 1 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 communication channels using clear language and ensuring they are proactive in monitoring for early signs of financial stress or vulnerability at a customer level and not just a product level

Not all of the financial challenges faced during the current cost of living of crisis are the same as those faced during the pandemic and flexibility in how customers are supported is key.

However, many of the conclusions of the research are opportunities for systemic change that can support financial institutions in the way they treat their customers in line with forthcoming Consumer Duty regulations.

We’re keen to make these insights accessible to the wider industry to share good practice and allow for innovation and tailored support to continue.

About the research

The research is complementary to the FCA’s Borrowers in Financial Difficulty project, which also looks at the support and forbearance lenders gave to customers in difficulty over the pandemic.

Our research specifically focuses on major banks and building societies and looks more broadly across their whole response to Covid-19.

Our recommendations – including those on customer outreach, identifying vulnerability and referring customers to wider support services – support the FCA’s findings and we welcome their calls for firms to learn lessons from the pandemic.

To develop our understanding of how banking customers experienced the Covid-19 support measures, we collected primary consumer data via:

• Consumer surveys which were completed by c1,400 consumers and consisted of set questions relating to the measures and their impact
• Five consumer focus groups attended in total by 28 consumers and designed to provide further content and to elaborate on observed survey trends
• 40 individual one to one consumer interviews to further expand our understanding

We were pleased to work with three major institutions on this research -Lloyds Banking Group, NatWest Group and Yorkshire Building Society. Their responses provided an invaluable contribution to the findings and related to:

• The measures the institutions implemented
• Any considerations or challenges faced when implementing these measures
• The sustainability of these measures
• The expected customer benefit

Beyond the primary data provided by these three institutions we also examined publicly accessible information to build a picture of the actions taken during Covid-19 and the impact on the seven in scope banking institutions – Barclays UK, HSBC UK, Lloyds Banking Group, Nationwide Building Society, NatWest Group, Santander UK and Yorkshire Building Society.