Using customer insights to identify and serve financially vulnerable customers.

By Shona Sabah
Senior Manager - Strategic Growth Lead

Today – perhaps more so than ever – truly understanding diverse and complex customer needs is essential for providing relevant and inclusive services. Customer segmentation allows businesses 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 essential goods and 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 an increasing regulatory requirement, particularly in essential goods and services sectors such as utilities, broadband, and mobile. Regulatory bodies, including Ofcom, are introducing stricter guidelines to ensure vulnerable customers receive fair treatment, with industry consultations underway to further strengthen protections. 

Businesses that proactively address these challenges not only comply with evolving regulations but also build long-term customer loyalty. Vodafone’s ‘Everyone Connected’ initiative, for example, demonstrates how companies can support financially vulnerable customers by offering discounted broadband and mobile tariffs, ensuring access to essential digital services. By leveraging customer insights, merchants can develop solutions that offer meaningful support, improve financial well-being, and contribute to broader financial inclusion. 

This article explores how companies 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 manage budgets 
• 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 flexible payment options when making purchases 

Traditional payment and retail 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 companies recognise financially vulnerable customers and better understand their needs. Various data sources can help build a clearer picture, including: 

• Transactional data – patterns such as reliance on 'buy now, pay later' (BNPL) options, frequent declined transactions, or heavy use of discounting strategies 
• Behavioural analytics – indicators like abandoned carts on essential goods or irregular spending patterns 
• 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: 

• Increased use of alternative payment methods, such as BNPL or payday loans 
• Frequent small purchases instead of bulk buying (indicative of budget constraints) 
• Hesitancy or delays in completing purchases 
• High engagement with discounts, loyalty points, and promotional offers 

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

How businesses can better serve financially vulnerable customers 

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

1. Flexible payment solutions - Businesses should design payment options that accommodate financial instability, such as: 

• Providing interest-free instalment plans or more responsible BNPL options 
• Offering loyalty rewards or discounts tailored to essential goods and service
• Allowing flexible payment dates to align with customers' income cycles 
• Reducing minimum spend thresholds for discounts or free shipping 
• Implementing VRPs as an alternative to traditional direct debits 

2. Personalised communication - For customers experiencing financial hardship, the way businesses 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 
• Offering multiple support channels, including chat, phone, and email, for customers to discuss financial concerns discreetly 
• Providing proactive notifications about budget-friendly options, rather than penalty-driven alerts 
• Offering personalised recommendations based on purchasing history to help customers make cost-effective choices 

3. Financial education and empowerment - Providing accessible financial education can help customers build resilience. Businesses can support this through: 

• Offering digital tools and interactive content that help customers manage budgets effectively 
• Implementing AI-driven spending insights that provide real-time, personalised advice 
• Promoting community initiatives, workshops, and partnerships that foster financial literacy 

4. Partnerships and ecosystem support - Collaboration across industries can enhance inclusion efforts. Merchants, financial institutions, 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 
• Develop initiatives that provide discounts or emergency relief for those in financial distress 
• Advocate for fair lending practices in retail finance options 
• Build digital solutions that help customers track and manage their financial health

Examples of this in action 

Retailers and service providers are taking proactive steps to better support financially vulnerable customers through tailored programmes and inclusive design initiatives: 

• Vodafone's 'Everyone Connected' Initiative – Vodafone has introduced discounted broadband and mobile tariffs for low-income households to help bridge the digital divide. Their social tariffs offer significantly reduced rates on essential connectivity services, ensuring that financially vulnerable individuals can access online resources for education, job searching, and communication.  

• Tesco Clubcard Prices & Pay+ – Tesco uses customer data to provide targeted discounts on essential items, ensuring affordability for budget-conscious shoppers. Their Pay+ digital wallet also allows customers to manage their spending more effectively by tracking purchases in real time. 

• IKEA's Responsible BNPL – IKEA has partnered with financial providers to offer interest-free instalment plans designed to help customers furnish their homes without resorting to high-cost credit. They also provide financial education resources alongside these offerings. 

These initiatives demonstrate how merchants 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 business practices. By leveraging customer insights, businesses can develop tailored solutions that promote financial well-being and inclusion. 

To achieve this, companies should: 

• Invest in data analytics and customer research to identify at-risk segments 
• Design flexible payment solutions that address the challenges of financial vulnerability 
• Foster partnerships with financial institutions, charities, and non-profits to drive meaningful change

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

How KAE can help 

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