Using customer insights to identify and serve financially vulnerable customers.

By Nicky Cockerill 
Consultant

Today – perhaps more so than ever – truly understanding diverse and complex customer needs is essential for providing relevant and inclusive services. Customer segmentation allows financial institutions to tailor their products and communications more effectively, ensuring that no group is overlooked. Among the most critical yet often underserved segments are financially vulnerable customers, individuals who face economic instability and barriers to accessing mainstream financial services.

Recent data from the Financial Conduct Authority (FCA) indicates that financial vulnerability remains a significant issue in the UK. In January 2024, approximately 14.6 million adults (28% of the adult population) reported not coping financially or finding it difficult to cope. Additionally, approximately 7.4 million adults (14% of the adult population) reported struggling to manage their domestic bills and credit commitments.1

Recognising and addressing the needs of these customers is both a social responsibility and a key part of delivering fair and sustainable financial services. By leveraging customer insights, organisations can develop solutions that offer meaningful support, improve financial well-being, and contribute to broader financial inclusion.

This article explores how organisations can identify financially vulnerable customers and implement strategies to better serve them.

Defining financially vulnerable customers

Financial vulnerability can affect people from all walks of life, particularly those facing income instability, limited access to credit, or financial hardship. This includes:

• Low-income individuals who may struggle to cover essential expenses

• Gig economy workers and freelancers with unpredictable earnings

• Individuals with limited financial literacy who may find it difficult to navigate banking services

• People affected by economic shocks such as job loss, health challenges, or unexpected costs

Common financial challenges faced by these customers may include:2

• Difficulty accessing affordable credit, often leading to reliance on high-cost borrowing

• Irregular income patterns that make budgeting and bill payments challenging

• Limited savings and financial buffers to manage unexpected costs

• A lack of tailored financial products and/or services that meet their specific needs

Traditional banking and payment services do not always accommodate these challenges, leaving financially vulnerable customers underserved. Identifying these individuals is the first step in creating solutions that provide meaningful support.

The role of customer insights in identifying these segments

Customer insights can help organisations recognise financially vulnerable customers and better understand their needs. Various data sources can help build a clearer picture, including:

• Transactional data – patterns such as frequent overdraft usage, low savings balances, or reliance on payday loans

• Behavioural analytics – indicators like irregular income deposits or repeated late payments

• Customer feedback – direct insights from surveys, service interactions, and complaints

• Qualitative research – in-depth interviews and focus groups that highlight lived experiences

Key indicators of financial vulnerability uncovered by this data may include:

• Heavy use of short-term credit

• Frequent account overdrafts

• Sudden drops in income or erratic financial behaviour

• Dependency on alternative financial products that carry high fees or interest rates

A combination of quantitative (data-driven insights) and qualitative (customer experiences) research provides a comprehensive understanding, allowing organisations to develop targeted support strategies.

How organisations can better serve financially vulnerable customers

Once financially vulnerable customers have been identified, organisations can take proactive steps to support them:

Product and service innovation

Financial institutions should design products that cater to the needs of those with financial instability, such as:

• Taking vulnerable consumers into account at all stages of the product and service design process, including idea generation, development, testing, launch, and review, to ensure that products and services meet their needs

• Offering affordable, transparent banking solutions with no hidden fees

• Providing flexible credit options that offer fairer alternatives to high-cost lending

• Creating budgeting and financial planning tools that help customers manage variable incomes

Personalised communication

For customers experiencing financial hardship, the way organisations communicate is just as important as the services they provide. Supportive, empathetic messaging can improve engagement and trust. Key approaches include:

• Ensuring that all communication about products and services is clear, jargon-free, accessible, and tailored to the needs of the target audience

• Adapting communication strategies to better support vulnerable consumers, offering multiple channels where possible to provide choice and flexibility

• Providing proactive notifications about financial health, rather than penalty-driven alerts

• Offering personalised guidance on managing money, based on individual circumstances

• Establishing systems and processes that encourage and support vulnerable consumers in disclosing their needs, while also enabling organisations to proactively identify signs of vulnerability and offer appropriate assistance

Financial education and empowerment

Providing accessible financial education can help customers build resilience. Organisations can support this through:

• Offering digital tools and interactive content that explain key financial concepts

• Implementing AI-driven financial coaching that provides real-time, personalised advice

• Promoting community initiatives, workshops, and partnerships that foster financial literacy

Partnerships and ecosystem support

Collaboration across the financial ecosystem can enhance inclusion efforts. Banks, FinTech's, regulators, and non-profits can work together to:

• Partner with charities and non-profit organisations to better understand the challenges faced by customers with additional needs. Their insights can provide invaluable feedback on product development, highlight potential barriers, and help refine services to better support vulnerable individuals

• Develop programmes that offer financial coaching

• Advocate for fair lending practices and alternative credit assessment models

• Build digital solutions that help customers manage their financial health

Examples of this in action

Financial institutions are taking proactive steps to better support financially vulnerable customers through tailored programmes and inclusive design initiatives:

• Lloyds Bank Financial Wellbeing Programme – Lloyds uses customer data to identify financially vulnerable individuals and provide personalised financial insights. Their in-app notifications alert customers to potential financial risks, such as low balances or increased spending, while specialist support teams offer tailored guidance on budgeting and debt management. Additionally, Lloyds has helped over 1 million people improve their financial and digital skills through proactive engagement and education. By taking a preventative approach, Lloyds helps customers to build resilience and avoid financial distress before it escalates.3

• NatWest Inclusive Design Panel – NatWest has embedded inclusive design into its product development process to better serve customers in vulnerable situations. Its Inclusive Design Panel, composed of experts from charities and individuals with lived experience, evaluates products through the lens of financial vulnerability, ensuring accessibility and fairness. The bank also conducts Customer Vulnerability Impact Assessments at the design stage to identify potential risks and mitigate harm. By prioritising inclusive design principles and engaging directly with affected communities, NatWest enhances financial accessibility and ensures its services meet the diverse needs of all customers.4

These initiatives demonstrate how financial institutions can create more inclusive and supportive services by addressing the specific challenges faced by vulnerable customers.

Understanding and supporting financially vulnerable customers is both a social responsibility and a key part of delivering fair and sustainable financial services. By leveraging customer insights, organisations can develop tailored solutions that promote financial well-being and inclusion.

To achieve this, financial institutions should:

• Invest in data analytics and customer research to identify at-risk segments

• Design inclusive products and services that address the challenges of financial vulnerability

• Foster partnerships with regulators, FinTech's, and non-profit's to drive meaningful change

By prioritising financial inclusion, organisations can create long-term value for both customers and the wider financial ecosystem. Investing in customer insights today will help build a more resilient, inclusive financial future.

How KAE can help

KAE specialises in helping financial organisations uncover deep insights about their customer , enabling them to design products, services and strategies which can be used to help you better support different segments, including financially vulnerable customers. If you want to talk about how KAE can help you, get in touch.