This interview features Stuart Murgatroyd, CEO of Data on Demand, discussing the evolution of data use in financial services to better identify and support vulnerable customers.
It explores how regulatory changes, particularly from the FCA, have pushed firms to seek richer, more diverse data sources beyond traditional credit reference agencies.
The discussion covers innovative products like “Know Your Vulnerable Customer,” which aggregate multiple external datasets—such as high-cost loan applications, bereavement, insolvency, and mental health registers—into a holistic vulnerability profile aligned with FCA characteristics.
Stuart highlights practical use cases, challenges in data completeness, and the increasing importance of early identification to prevent harm and improve customer outcomes. It also touches on the future trajectory of vulnerability data, including the integration of AI and the need for ongoing data governance to meet evolving regulatory expectations.
Find out more about Data On Demand-> Here.
Key Take Aways
- The data landscape in financial services has evolved significantly over the past five years, with increasing use of diverse data sources beyond traditional credit reference agencies.
- There is a growing regulatory focus, particularly from the FCA, on identifying and supporting vulnerable customers, which drives the need for richer data sets.
- Traditional identification of vulnerability largely relies on customer self-disclosure, but this accounts for only about 3-4% of vulnerable customers, whereas FCA estimates vulnerability affects 50% of people.
- New products like “Know Your Vulnerable Customer” (KVC) aggregate multiple external data sources to better identify vulnerability, including income shocks, bereavement, employment changes, and mental health indicators.
- High-cost short-term loan data, insolvency registers, bereavement databases, and vulnerability registration services are valuable alternative data sources that reveal early signs of financial distress.
- Vulnerability is dynamic and can change over time, so ongoing data aggregation and monitoring are crucial for early intervention before customers enter arrears.
- Combining multiple data sets creates a layered view that can pinpoint individuals with complex vulnerabilities, enabling more tailored outreach and support.
- The data available in current KVC products covers about 10 million people, but this still falls short of the FCA’s estimated total vulnerable population, highlighting the need for integration with other sources.
- Real-world use cases, such as UK Power Networks, demonstrate how targeting the most vulnerable first and then expanding support yields effective outcomes and inclusive customer care.
- Adoption of advanced vulnerability data solutions is accelerating as firms develop clear strategies for acting on insights, moving beyond just identifying vulnerability to delivering meaningful customer engagement.
- Regulatory frameworks such as Consumer Duty and FCA board reporting are increasing pressure on firms to demonstrate proactive vulnerability identification and appropriate customer treatment.
- Future data innovations will focus on adding more diverse data sources, integrating credit bureau insights, and potentially leveraging AI to enhance speed and accuracy of vulnerability detection, though human-provided data remains essential.
Innovation
- The launch of the “Know Your Vulnerable Customer” (KVC) product that aggregates multiple novel data sources into a single customer view aligned with FCA vulnerability characteristics.
- Use of high-cost loan application data as a rich source of early vulnerability indicators, capturing financial stress before traditional arrears data emerge.
- Integration of diverse external data sets including bereavement, insolvency, benefits eligibility, and mental health indicators to build a holistic vulnerability profile.
- Implementation of dynamic, layered data overlays that combine demographic, financial, and life event data to create granular individual vulnerability scores.
- Simplified FCA-aligned vulnerability flagging enabling firms to easily report progress and outcomes in regulatory submissions.
- Use case methodology starting from most vulnerable customers and gradually expanding outreach to avoid exclusion (“leave no one behind” approach).
- Combining vulnerability data with behavioural insights to enable earlier, more constructive conversations with customers before crisis points.
Key Statistics
- Data On Demand processes around 80 million UK individual records, covering a broad range of data points.
- FCA estimates 50% of customers may be vulnerable, while firms typically identify only 3-10%.
- The KVC product has vulnerability data on around 10 million individuals, increasing identified vulnerability in a challenger bank’s portfolio from 3% to 7%.
- Vulnerability prevalence in the arrears portfolio can reach 25%.
- Average loan value linked to vulnerable customers is approximately £4,000.
Key Discussion Points
- Evolution from reliance on customer self-reporting to proactive data-driven vulnerability identification.
- Importance of aggregating multiple external data sources to capture a wider and earlier picture of vulnerability.
- Challenges of incomplete data coverage and the necessity of working with overlapping but partial data sets.
- Regulatory pressure, especially FCA’s Consumer Duty, driving firms to improve vulnerability detection and evidencing.
- Need to balance product complexity with usability and clear alignment to FCA vulnerability frameworks for adoption.
- Practical examples of data application in utilities and financial services sectors to identify vulnerable customers.
- The dynamic and transactional nature of vulnerability requiring ongoing data refresh and monitoring.
- Benefits of early identification to prevent further financial harm and support customer resilience.
- The emerging role of AI in accelerating data processing, though human data inputs remain critical.
- Data governance, privacy, and documentation as essential elements to satisfy regulators like ICO and FCA.
- Market demand driven by challenger banks and firms seeking competitive advantage via better customer care.
- Future outlook for building a comprehensive “Amazon-like” vulnerability data platform integrating diverse sources.
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