The cost-of-living crisis isn’t just affecting customers – it is having a massive impact on financial services. Typically, banks are accustomed to navigating disruption and managing risk. Yet, the new wave of challenges sparked by economic permacrisis is forcing banks to adapt their internal processes at speed to keep up with evolving customer demands.

Financial organisations must build agility into their operations with the right software, systems, and processes to react quickly and help customers in their time of need. The public is looking to banks and insurers to help them through these tough times, demanding more support, taking advantage of government schemes, and for those that are hit hardest, looking for banks that accept customers with no fixed abode.

Soothing customer concerns

The impact of the economic crisis on customers is unprecedented. Big high-street retailers note record numbers of customers using credit to shop, insurers flag a spike in accidental damage claims, and research from the Bank of England states that more than half of young people and students are worried about their current earnings and future income prospects.

At the end of 2022, the British public reached the highest levels of borrowing for any December on record, with more than £27 billion. This unprecedented level of loans and credit means that banks need to be ready to handle more high-emotion enquiries, deal with late or missing payments, and give customers appropriate help and guidance.

To offer customers a greater feeling of security in their borrowing and an outlet for financial issues, some banks are setting up dedicated teams to handle cost-of-living enquiries. However, this requires new processes and infrastructure, as well as HR input for resourcing and upskilling.

For example, Nationwide launched a dedicated freephone, cost-of-living helpline last year to help customers understand their existing debt and access advice on mortgage repayments. To deploy a new helpline at such a rapid pace to keep up with customer demand, Nationwide had to put new infrastructure, people, and processes in place at speed.

Process modelling can help building societies to ensure that new services are fit for purpose before implementation, using existing cloud-based software able to scale and handle these new demands.

Adapting to unexpected regulations and changing terms

Disruptions are not always directly linked to the customer - new regulations, government schemes, and changes in lending terms are just as likely to create new operational challenges for banks. For instance, the Breathing Space scheme from the UK government mandates banks to give customers 60 days leeway, or ‘breathing space’ from their debt. With the ever-changing terms of short-term loans disrupting the balance with long-term treasuries, it can prove challenging for banks to survive.

The unexpected impact of schemes like this can threaten capital adequacy, as banks must give more time to a significant proportion of customers to make their payments. Process modelling is vital to assess the potential impact on the organisation, what they need to put in place in their operations to cope with this new disruption, and what they need to change to cope with customer enquiries on the scheme.

For instance, do they need to pull in money from other parts of the organisation to satisfy this scheme and ensure business continuity? How will government schemes impact other areas of the organisation and will changes be sustainable? Process mining and modelling help banks to identify where change is needed. By connecting applications and data across the financial organisation, leaders can gain a rapid, clear picture of customer demands and capital reserves. Without this, banks put their planning and decision-making at risk with outdated data, which can lead to even more issues in the long term.

Creating a safe space for unbanked customers

An unfortunate yet inevitable result of the cost-of-living crisis is the rise in homelessness. In some areas of the UK, homelessness rates are four times higher than they were in 2020, with 35% of Brits believing that they are at risk of becoming homeless in 2023.

Banks are working to support those that unfortunately no longer have a fixed abode - so-called unbanked customers. This means that some financial institutions are changing their onboarding processes and the ways that people can gain access to their accounts to accommodate the needs of homeless customers. For instance, HSBC’s No Fixed Address programme helps people with no fixed address access banking services. The scheme works to give unbanked customers a safe place to keep and spend their money received from work or benefits, as well as the means to spend or save towards their future.

This will of course have an impact on how the bank operates, with new processes and infrastructure required to support unbanked customers, especially in homeless hotspots around the UK with increased demand. Process modelling helps banks to assess the need in different areas, adapt operations to accommodate this increasing number of customers, and link in with HR to ensure that in-branch and contact centre staff are trained in how to deliver the programme.

The cost-of-living crisis continues to have a large impact on customers and banks alike. From setting up crisis helplines, to adapting to new regulations, to providing support for unbanked customers, financial organisations play a crucial role in helping the British public through these tough times. Banks must ensure that their operations can flex to cope with ever-evolving requirements, so that they are able to react rapidly and give customers the support they need, now more than ever.