Could Banks Have Handled the PPI Scandal More Efficiently?
The deadline to claim PPI compensation has passed. It is now clear just how poorly the financial services industry estimated their losses, with the total cost to British banks from PPI claims exceeding £50bn. This is not an abstract loss or mere balance sheet adjustment – these expenses eat into profits and shareholder returns. Adding to the industry’s frustration is the knowledge this issue could have been identified and prevented many years ago.
PPI is sold alongside financial products to ensure future payments in case of illness, redundancy, or death, with a total of 64 million PPI policies sold in Britain since 1970. In 2005, it was revealed that a large proportion of those policies were mis-sold, and many consumers were unaware that they had been paying for PPI.
Alongside the PPI scandal, one bank has been accused of attempting to reduce compensation pay-outs by cutting professional claims management firms out of communications with customers. The Competition and Markets Authority has also rebuked two major banks for failing to send annual reminders to customers about their PPI policies and their right to claim. It is clear these companies need to fix the cultural issues that led to the scandal and develop a new internal strategy which puts the customer at the heart of their business processes.
The failure to communicate transparent and correct information to customers has rightly led to a rise in customer complaints. In 2019 alone, customers have brought more than 388,000 complaints before the Financial Ombudsman – a 14% increase from 2018. PPI remains the product most complained about, with over 70,000 new complaints in the first half of 2019. With today’s digital natives ready, willing, and able to switch banks if their issues are not resolved expeditiously, banks should be worried about this rise in complaints.
The Financial Conduct Authority has been encouraging business leaders to take responsibility for their firms’ failures, and to recognise PPI as an institutional failure rather than the fault of individual ‘bad apples’. Banks need to reflect on their internal failures and understand which processes are failing customers by developing a holistic view of all business operations and customer touchpoints.
Embracing these vital strategies and ensuring all internal processes run simultaneously and reliably means banks can easily identify bottlenecks within their delivery, and keep their external communication with customers accurate and transparent. Acting on real-time intelligence will not only enable banks to keep pace with customer demands, but also ensure the correct information is being communicated at all times.
Banks also need to ensure that their end-to-end processes are regularly reviewed and updated to avoid incorrect data entering and remaining in the system. If processes are not updated or managed – particularly high-volume processes – then customer data may be incorrectly entered, stored, or acted on. Integrating reliable technology systems and training staff to review processes from a customer perspective must be top priorities.