In financial services, vulnerability has long been perceived as a liability—a risk to be managed or minimised. But what if we’ve been looking at it the wrong way? At Serene, we believe that vulnerability is neither good nor bad. It is an intrinsic part of the human experience. Our vulnerabilities reflect the unique circumstances that shape our lives, and understanding them could revolutionise how financial institutions interact with their customers.
Despite growing regulatory pressure and increasing awareness of its complexities, vulnerability is still largely treated as a sign of weakness by many financial service providers. We call this the Vulnerability Trap. It’s the gap between recognising vulnerability as a risk and seeing it as an opportunity. The question is: what if we embraced vulnerability instead of shying away from it? Could it hold the key to unlocking better outcomes for both consumers and businesses?
As the financial services sector accelerates towards digitisation, the demand for personalised, empathetic services has never been greater. Properly understanding and addressing vulnerability could become one of the industry’s most powerful competitive advantages.
The financial services industry faces a stark challenge: 52% of adults in the UK exhibit signs of vulnerability, yet only 3% are recognised by their service providers (FCA, 2023). This isn’t just a gap—it’s a chasm. Outdated, reactive approaches to vulnerability management, often reliant on manual processes and incomplete data, fail to capture the full picture. As a result, vulnerable customers are pushed to the margins, and both consumers and institutions bear the risks.
This is the essence of the Vulnerability Trap: Without reliable ways to recognise or support vulnerable customers, firms adopt risk-averse strategies that exclude millions of people from essential financial services. Ironically, these strategies exacerbate financial risk, rather than mitigating it.
Vulnerability is often viewed in binary terms—a person is either vulnerable or they’re not. This crude assessment overlooks the nuanced and dynamic nature of vulnerability. For instance, a customer with a learning disability may face challenges without appropriate support, but thrive with tailored assistance.
Reframing vulnerability as an opportunity allows financial institutions to gain deeper insights into customer needs. This results in improved service, better customer outcomes, and more sustainable business models. At Serene, our AI-powered platform helps institutions cut through the “vulnerability fog,” offering real-time insights into financial behaviour, enabling timely and personalised support. This proactive approach reduces risk by providing:
Regulation is now a driving force for change. The FCA’s Consumer Duty mandates that “firms must act to deliver good outcomes for retail customers, with a particular focus on those in vulnerable circumstances.” But compliance isn’t just about avoiding penalties; it’s about aligning business practices with the needs of vulnerable customers.
In the consumer credit space, for example, the stakes are especially high. As credit offerings become more prevalent, failing to identify and support vulnerable borrowers exposes institutions to higher default rates, reputational damage, and financial loss. However, firms that proactively manage vulnerability can:
Addressing vulnerability has benefits that go beyond consumer credit. Across retail banking, wealth management, insurance, pensions, and even utilities and telecommunications, understanding vulnerability opens up opportunities for proactive customer engagement. For example:
Timing is everything. By knowing when to act, financial institutions can make a real difference to their customers’ lives. Whether it’s offering a payment holiday, adjusting insurance premiums, or providing budgeting advice, timely intervention prevents issues from spiralling out of control. Leveraging real-time data enables firms to engage with customers at critical moments, delivering better outcomes at lower costs.
As the financial services industry becomes increasingly digital, one of the key challenges is maintaining a human connection with customers. The solution lies not in replacing human interaction with technology, but in using technology to foster more meaningful, timely, and personalised communications. It’s about finding the right tone, timing, and messaging to meet customers where they are, rather than where outdated models expect them to be.
Embracing a new approach to vulnerability management has the potential to transform the financial services landscape. By integrating vulnerability into core decision-making processes, firms can reduce risk, improve customer outcomes, and expand access to essential services. This isn’t about avoiding risk—it’s about understanding it, managing it effectively, and using it as a driver of positive change.
At Serene, we are leading this change. Going us as we turn uncertainty into clarity and help financial services achieve better outcomes for all.
Contact us today to learn how Serene can help you proactively identify, understand, and support vulnerable customers while driving business value.
