Supporting customers through economic uncertainty: a renewed mandate for UK banks

UK consumers are once again facing significant financial headwinds. With tariffs climbing, inflation forecast to rise after a temporary respite, and the broader economic outlook clouded by geopolitical instability, many households are bracing for renewed pressure on their day-to-day finances. In this environment, the obligation on banks to support financially vulnerable customers has developed into both a regulatory priority and a test of institutional credibility.

Nearly a year has passed since the final implementation of the Financial Conduct Authority’s (FCA) Consumer Duty. Expectations around customer care have matured, and the FCA has recently taken steps to clarify and simplify the framework, offering firms greater flexibility in how they meet the standards. However, this flexibility does not negate the responsibility to act. Banks must not only demonstrate compliance but show leadership in proactively supporting their customers.

Consumer duty one year on

July 2024 marked the final deadline for Consumer Duty implementation, ushering in a new era of accountability and outcome-driven service. Since then, the FCA has emphasised clarity in execution, providing banks with a clearer path to tailoring communications and support strategies. This presents a key opportunity. By aligning regulatory compliance with enhanced customer engagement, financial institutions can both meet obligations and build trust.

A core tenet of the Duty is the principle of delivering "good outcomes" for customers. This requires banks to demonstrate that they are acting in customers' interests, offering fair products and ensuring that information around products is understandable, allowing customers to make well-informed decisions. Recent FCA updates have reaffirmed this emphasis on outcome-focused service, challenging banks to embed this thinking into every customer touchpoint.

While the regulator is encouraging simplification, consumer expectations have risen. According to the FCA’s Financial Lives survey, nearly one in four adults feel overwhelmed when managing their finances, with higher rates among younger and lower-income demographics. This emotional toll underscores the importance of banks going beyond compliance and becoming reliable partners in their customers’ financial lives.

Predicting customer needs before problems arise

One of the most tangible ways banks can step up is by moving from reactive to proactive support. Rather than waiting for customers to reach out in distress, forward-thinking banks are now using data analytics to anticipate issues before they escalate.

For example, upcoming changes to Universal Credit thresholds and adjustments to local council tax benefits could create sudden income shortfalls for vulnerable groups. Banks that monitor for such risks and intervene with personalised alerts or financial planning tools can make customers aware of their options, and reduce the risk of default or distress.

Crucially, support must be personalised and delivered through the customer’s preferred channel. That could be achieved through a secure in-app message, a printed letter for those less digitally engaged, or a conversation with a specialist advisor. The goal remains the same: sending the right message, through the right channel, at the right time. Poorly timed or impersonal communication can make vulnerable customers feel even more alienated.

To do this well, banks must look beyond individual interactions and build a deeper understanding of who their customers are, and what they need. That’s where segmentation becomes essential.

Evolving the duty of care in a fragmented market

As the cost-of-living creeps upward once more, the need for truly personalised support becomes even more pressing. Financial journeys have become increasingly non-linear. The assumptions that someone in their 30s is mortgage-ready, that a customer in their 20s is planning a wedding, or that someone in their 60s is retiring, no longer hold true.

This new landscape demands a departure from transactional thinking in favour of long-term relationship building. Segmentation strategies must be driven by behaviour, context, and need, not blunt demographic assumptions. Banks must offer tools and services that are shaped around how customers actually live and spend, not how legacy models expect them to.

Broad-brush approaches to support are no longer acceptable. Today's financial services environment demands nuance, empathy, and precision. With nearly half (45%) of adults aged 18 to 24 switching their bank account in the past year, the commercial stakes are high.

Trust as a differentiator

Banks stand at a strategic crossroads. The intersection of regulatory expectation, shifting consumer behaviour, and economic volatility will converge to test the industry’s resilience. Those that act with agility, leveraging data to drive clarity, empathy, and timing in their communications, will not only meet the FCA’s evolving standards but elevate their standing with customers.

The Consumer Duty was never meant to be a one-time compliance event, as its wording was deliberately left broad to allow firms the flexibility to tailor their approach. That flexibility comes with an ongoing call to action: a structural shift in how banks communicate value, build understanding, and create better customer outcomes at every touchpoint.

Those who embrace this shift are future proofing their customer relationships, and in today’s market, trust isn’t just a differentiator, it’s the currency of loyalty. Banks that recognise this will survive the challenge and gain a competitive edge, while others, held back by outdated models, risk falling further behind.