I recently got a new phone. Much of the hassle of setting up the linchpin to your life has been removed: simply stick it next to the old one and the magic of Bluetoothy tech means apps, settings and information spontaneously appear on the new device.
The biggest faff was, for obvious reasons, reactivating payments cards and banking apps that require various identification checks, face scans and password hurdles. But in only one case did I have to do the unthinkable: use the technological appendage for its original purpose and telephone the bank. It was, slightly predictably, the only Big Six, high street bank in my wallet.
The stereotype of the biggest UK banking names battling inadequate technology to provide subpar customer service is slightly unfair. Big banks such as Lloyds, Barclays, HSBC and NatWest have put billions into improving their digital services in recent years, not least after the coronavirus pandemic massively accelerated customer adoption.
But it remains the case that high street lenders are generally working with an older patchwork of systems than their neobank, fintech or digital-only competitors. “The IT systems at traditional banks tend to be old and they are often running multiple different platforms assembled through mergers and iterative developments,” says Amanda Gray, co-head of financial services at Addleshaw Goddard.
This is costly, inefficient and probably annoying for everyone involved. But it also presents a looming regulatory risk. From the beginning of July, UK banks will be subject to a new consumer duty — a broad requirement on financial services companies to prove they have acted in customers’ best interests and produced “good outcomes” for clients.
On a basic level, this requires you to be able to monitor what customers are doing with you, across different products and services, monitor how they’re faring, and produce evidence that all is well. This, at the risk of stating the obvious, is harder to do across six or seven old tech platforms that don’t talk to each other. The Financial Conduct Authority in January flagged that some firms hadn’t properly considered the data requirements of the new duty or were assuming they could simply repackage existing data. Other lenders have the data but aren’t necessarily able to use it.
What’s clear is that banks aren’t going to get a pass on the digital challenges of the duty, any more than the product design or marketing ones. The regulator last year noted that reviewing older products on legacy technology systems may be more difficult (and gave a year’s grace to 2024 for closed products that are no longer open to sale or renewal). It has also indicated that it wanted to see stop-gap plans where constraints around time or resources meant IT programmes wouldn’t be ready in time.
Relatively basic, cost-saving tech may also need adapting. Automated or digital-only customer support doesn’t suit everyone. The regulator, in its guidance, pointed to risks from under-resourced helplines, dodgy phone systems and poorly designed websites.
What is tricky ahead of a vast new piece of regulation, which actually refers to groups of customers rather than individuals, is that banks can’t assume the right answer will always be more data and more tailoring. At a recent parliamentary hearing covering topics such as the passing on of higher interest rates to savers and costly standard variable-rate mortgages, bank bosses talked about efforts to identify and nudge customers into other products.
“What is a good outcome from a customer perspective?” asks Chris Woolard, former FCA regulator now at EY. “Asking customers to move to a better value product or automating the decision by improving the value of the basic product? The consumer duty is pushing towards keeping it simple for the customer.”
There is no better outcome than simply giving people a good deal.
