AI, Vulnerability and Customer Outcomes: Lessons for Pensions and Financial Services

Kerry Berchem recently contributed to a report by The Payments Association on How AI-powered banking tools are failing vulnerable customers. This research highlights a significant gap between adoption and outcomes for vulnerable customers. While vulnerable customers are often enthusiastic users of digital services, they are also substantially more likely to experience failed digital journeys and poorer outcomes.

In this article, we explore how pensions providers and financial services firms can ensure that digital transformation is not solely a technology exercise, but a customer outcomes exercise.

Vulnerability is a mainstream issue

The research found that 59% of UK adults meet the FCA's definition of vulnerability. This is not a niche issue affecting only a small subset of customers. It can arise from:

• health conditions (both physical and mental);
• low capability;
• financial resilience issues; or
• adverse life events such as bereavement, illness, or job loss. 

For pensions providers and trustees, vulnerability may manifest for customers during key life events such as retirement, bereavement, ill health, or financial hardship. 

For financial services firms, vulnerability is not limited to a particular type of customer or a particular point in time. It can arise or become more acute at any stage of the customer journey, particularly when individuals are navigating significant life events or making complex financial decisions.

The risks of poorly designed digital journeys

The research found that vulnerable customers were more than three times as likely to abandon a banking or payment task because a digital or AI-powered tool failed to meet their needs. Many reported frustration, reduced confidence in digital services and, in some cases, financial detriment. 

Importantly, the issue was not that vulnerable customers were avoiding technology. In many cases, they were among the most frequent users of digital and AI-enabled tools. The challenge was that the tools were not always designed to accommodate their circumstances. 

In her contribution to the report, Kerry noted that:

“There is risk with high-speed adoption of new tech that there will be a lack of pause for human-centred issues that merit meaningful consideration. Real thoughtfulness is required relative to the experience of consumers who are vulnerable. This research demonstrates the importance of alternatives for those who find tech difficult and the imperative of human touch points. It is incumbent on all firms to ensure that transformational tech improves the financial lives of all consumers, including those who are vulnerable.”

For pensions and financial services organisations, this creates both regulatory and commercial risks. Poor customer experiences can undermine trust, negatively affect outcomes, and raise questions about compliance with Consumer Duty expectations. 

A digital journey can be technically accessible without being genuinely inclusive. Under the Consumer Duty, firms should consider not only whether information is provided, but whether customers can actually understand and act on it. A journey that is overly complex, relies heavily on digital self-service or does not provide an easy route to human support may create additional barriers for some customers, particularly those with limited digital skills, low financial capability or health conditions affecting their ability to engage. Firms should therefore consider how their digital journeys work in practice for a diverse range of customers, using customer feedback, complaints and other data to identify where customers may be struggling, disengaging or experiencing poorer outcomes. 

What vulnerable customers actually want

• Easier access to a human – customers are not asking firms to reduce their use of AI, but instead they want easier access to a human being for additional support, when needed;
• Clearer language – we have previously explored the importance of clear, customer-centred communications and how this can impact the customer journey, in the context of inclusive investing;
• Alternative authentication methods – for example, where a vulnerable customer is being represented under a Power of Attorney or does not have access to multiple devices;
• Staff who understand their circumstances – this will be crucial, as currently one in two vulnerable customers feel misunderstood by their banking provider;
• The ability to pause and return – the ability to save progress, pause a journey and return later is important, recognising that customers may need more time to process information or seek support before making a decision; and
• Clear next steps – customers want clear signposting throughout the journey so they understand what is required of them, what will happen next and where to go for help. 

Practical tips for pensions and financial services firms

• Build inclusivity into design from the outset rather than retro-fitting accessibility features later;
• Maintain a clear human escalation route so that customers can quickly speak to an individual where needed;
• Evaluate systems with vulnerable users and individuals with a range of lived experiences before deployment;
• Use plain, accessible language in digital tools, communications, and customer journeys;
• Offer alternative channels and authentication methods rather than assuming a single digital route will work for everyone;
• Monitor outcomes for different vulnerability groups to identify where particular customers are encountering barriers;
• Align AI governance with Consumer Duty principles, focusing on fair outcomes and avoiding foreseeable harm;
• Test end-to-end customer journeys, including points where customers move between digital and human channels, to identify friction and unintended barriers; and
• Use complaints, customer feedback and journey analytics to identify where customers are struggling, abandoning processes or seeking additional support. 

Key takeaway

The research suggests that the future is not a choice between AI and human support. Rather, the most effective customer journeys are likely to be hybrid ones, combining digital efficiency with accessible human support. For firms, the challenge is not simply to automate more, but to understand where technology can improve the customer experience and where human intervention remains essential to achieving good outcomes. Put simply, it is to automate in a meaningful and genuinely impactful way, and in so doing enable better outcomes for more customers.

You can read more thought leadership like this by subscribing to our monthly financial services regulation update or our monthly pensions newsletter.  If you would like to speak to one of our financial services experts, we would be happy to discuss this in more detail. 

There is risk with high-speed adoption of new tech that there will be a lack of pause for human-centred issues that merit meaningful consideration. Real thoughtfulness is required relative to the experience of consumers who are vulnerable. This research demonstrates the importance of alternatives for those who find tech difficult and the imperative of human touch points. It is incumbent on all firms to ensure that transformational tech improves the financial lives of all consumers, including those who are vulnerable.

https://thepaymentsassociation.org/article/how-ai-powered-banking-tools-are-failing-vulnerable-customers/