Despite the government’s commitment to regulate Buy Now Pay Later (BNPL) services in early 2021, there has been a notable silence on the issue, raising concerns among consumer groups that they may be backing down from this promise.
With the approaching Christmas season intensifying spending pressures amid a cost-of-living crisis, there is apprehension that financially stretched Brits may resort to excessive borrowing. Projections indicate a 9% increase in online spending through BNPL during the holidays.
In light of this, banking expert, Zahra Hassan, co-founder of Eligible asserts that banks must proactively communicate with customers, avoiding jargon and ensuring a clear understanding of financial products. Banks have long relied on financial jargon when communicating with customers; however, research from the Post Office has revealed 7-in-10 Brits admit to feeling overwhelmed by financial jargon used around money and savings.
Additionally, according to TSB Money, over a third (35%) of Brits have low or no confidence in their financial abilities. This raises genuine causes for concern when added to the fact that a quarter of BNPL users (23%) feel in complete control of their spending when using these products and nearly half (46%) of all people are still unaware that they could be referred to a debt collector for missing a BNPL payment, according to Creditspring.
Hassan asserts that with stats showing that less than half of UK adults have ever seen a financial adviser, despite Shepherds Friendly finding that three quarters of Brits struggle with financial literacy. There is a responsibility for banks to address this communication gap through adapting communication to be both accessible and relevant to the individual’s needs. Historically, the sheer volume of borrowers relative to lenders made this customisation challenging.
However, the advent of AI has provided a solution, empowering banks to analyse customer’s interactions with different information and adapting accordingly. This facilitates identifying knowledge gaps and personalising communication, both content and language, to better meet the diverse needs of their clientele. Zahra Hassan commented:
“What AI can do today is interact with customers and measure the level of understanding of their existing product before providing bespoke financial expertise. Based on this, we can start to form views on the likelihood that they could struggle to meet their payments.
AI can be used to detect how well people understand their financial product and use this data to spot vulnerable customers in order to better educate and support them.
AI has the power to transform customer support from a reactive relationship to a proactive one. Instead of banks providing support only when the customer asks for it, AI can detect those who are likely to need assistance and proactively engage with them, fostering education and active dialogue.”
