1st May 2025
When consumers disengage, there are often long-lasting consequences for their financial well-being. How can firms enable low-confidence consumers to re-engage with the financial services market?
Maths has never been my strongest subject. Where others could look at formulas or calculations and intuitively see the answer, I took hours of effort. I know that, regardless of what it's asking me, deciphering it would cause me considerable stress. There was also a very realistic chance I would end up being wrong despite my effort. Eventually, I stopped trying; it was better to use my time on things I was good at.
Unfortunately, when it comes to financial services, maths isn’t optional. Every product presents a unique mathematical challenge, whether it involves calculating compounding interest or determining fees. As many as 18.5 million adults in the UK have poor or low numeracy skills, and these individuals are less likely to engage with financial services as a result.
Disengagement from financial services causes a sizeable detrimental effect on consumers. This is especially true for vulnerable consumers, with many lacking the confidence required to take out the products they need.
So why do consumers disengage from financial services? If we understand what might be driving low consumer confidence, then firms can adapt their services to re-engage consumers who are being missed out.
Negative early experiences can have long-term impacts – When we have a bad experience, it's tempting to try distance ourselves from the source of the upset. The same is true in a financial context, with shame associated with poor financial well-being driving consumers to disengage with their finances entirely. Sticking your head in the sand about your financial situation is obviously only a short-term remedy for immediate stress reduction. In the long run, this behaviour will only compound the issues that are causing the upset.
We act the way that people say we will – If you tell someone they are bad at something often enough, then they are going to start believing it. When you set expectations that someone is going to fail at performing a task, then they are much more likely to go on to fail. Negative feedback or bad experiences then reinforce this, creating a vicious cycle of failure and poor outcomes. Financially, if someone has a negative early experience or receives a chasing or negative communication, they might start to pre-empt failure. This creates a self-fulfilling prophecy of disengagement.
Opportunities to learn and grow are infrequent – Consumers who are expected to struggle with financial decisions face a double-edged sword when it comes to gaining experience and confidence. We’ve written previously about the lack of learning opportunities for consumers in the financial services market. Unwillingness to learn is thoroughly ingrained in consumers' perceptions of their own strengths and weaknesses. When failure is expected, people are less likely to seek out opportunities to try, learn and improve their skills. They’re also less likely to be offered opportunities to improve by those around them. In trying to prevent harm by not putting pressure on consumers to learn, we may inadvertently be causing greater future harm to them. If we don’t get the opportunity to learn and grow, we never will.
Break down harmful perceptions about financial services – Providing positive feedback is a powerful motivator for behaviour change. On top of this, giving examples of people we feel are like ourselves succeeding in changing their behaviour leads to people following their example. Firms should lean into this. In their communications, they should provide examples of people who have successfully re-engaged with their finances, changed their behaviour and achieved positive outcomes. This could include helpful tips and guidance. They should also provide positive feedback at point of entry to encourage low-confidence consumers. Creating a positive and welcoming environment in financial services can prevent negative disengagement cycles from starting in the first place.
Break down decisions into manageable chunks – Scaffolding is a widely used technique in the field of education. It involves breaking down challenging problems into bite-sized chunks and then supporting learners through each chunk in turn. Problems and concepts which once felt insurmountable are made understandable through taking small steps forward. Consumer journeys and communications should be thought of in a similar way. Products, services, and decisions should be broken down into smaller, more easily understood sections, preventing consumers from feeling swamped.
Listen to consumers about what they need – Ultimately, this blog is a call for the industry to engage more with individual customers’ strengths and weaknesses. Rather than seeing customers as one homogenous group, every individual has a unique constellation of skills. My weakness is maths, but for others, it could be literacy. Listening to consumers and tailoring the messages and journeys they go through should be paramount in the consumer experience. Going the extra mile to cater to consumer needs is central to consumer duty. Financial communications and journeys should not be one-size-fits-all, just as there is no one-sized-fits-all consumer.