The current economic landscape across the UK continues to increase pressures on consumer pockets. As money becomes less valuable, many expect more from their banks and other financial service providers.

Now, the Financial Conduct Authority (FCA) has revealed that it logged around 1.87 million complaints from firms between July and December 2023. The FCA analyses and releases this data to evaluate financial firms’ treatment of customers and to track their performance over time.

The UK regulator found that banking and credit cards saw a 3.2 per cent increase in complaint numbers when compared to the first half of 2023. Meanwhile, home finance (up 3.7 per cent) and investments (up 3.4 per cent) also saw an increase in the volume of complaints.

According to the FCA, since 2016 H2, current accounts have remained the most complained about product. Continuing this trend, current accounts complaints rose by one per cent from 509,923 in 2023 H1 to 515,336 in 2023 H2.

To get a better understanding of what the data means, we took a look into how the total number of complaints has changed over time.

While at first glance it appears as though financial services firms have successfully improved their services and reduced complaints, particularly since H2 2019, a deeper dive into the data reveals that this isn’t necessarily the case.

In fact, complaints about Payment Protection Insurance (PPI) heavily inflated the total number of complaints between 2016 and 2020. Now that the deadline for consumers to complain about mis-sold PPI has long since passed (August 2019), the total number of complaints has essentially stagnated and generally sits just below the two million mark per six months.

Could a lack of any significant reduction in the number of complaints since the beginning of 2021 suggest that firms are struggling to cater to consumers in the way they need? Is it even possible for financial firms in the UK to make significant headway if complaints are inevitable anyway?

Keep the complaints coming

For Chris Reed, executive director of UK-based insurance broker Protect Line, the persistence of complaints highlights the positive work done by the regulator to keep financial firms in check: “In a landscape where the FCA sets a stringent regulatory framework, the UK’s financial services stand out for their commitment to consumer rights and complaint resolution.

“This rigorous environment, unique to our industry, ensures that consumer grievances are not just heard but addressed meticulously, offering a pathway to the Financial Ombudsman Service for further adjudication if needed. Such robust mechanisms invariably encourage consumers to voice their concerns, knowing their issues will receive the attention they deserve.

“At Protect Line, we see the persistence of complaints not as a failure but as a testament to the transparency and accountability fostered by the FCA’s oversight. This is particularly crucial in navigating the choppy waters of current macroeconomic conditions, where consumer confidence is paramount. While a completely complaint-free world remains an ideal, the reality of human error necessitates a framework that not only resolves issues but learns from them to better serve consumers.

“The recent introduction of the FCA’s consumer duty rules underscores a proactive approach, compelling firms to anticipate and mitigate foreseeable harm. This, alongside mandatory root cause analysis, ensures that complaints lead to systemic improvements rather than temporary fixes.

“Despite the figures, when placed in the context of the multitude of financial transactions occurring daily across the UK, the complaint volumes highlight a system working as it should — one where consumer confidence in the process encourages engagement and fosters improvements.

“In conclusion, it’s crucial we view these numbers as indicative of a healthy dialogue between consumers and firms, driven by a regulatory ecosystem that not only demands accountability but actively champions the consumer’s voice.”

‘Managing complaints is big business’

Jodi Searl, SVP of client value at Medallia, a customer and employee experience management company, explains the expense of dealing with complaints: “Managing complaints is big business, particularly in financial services. The largest banks spend a lot of money triaging complaints.

“How much do you think they spend each year? $100million? $500million? Try again: the biggest banks are spending up to and over $1billion per year on day-to-day complaints you and I might log, or complaints to CEOs and the Consumer Financial Protection Bureau (CFPB).

“With all of the focus on customer experience, you might ask yourself, how could this be? Well, for starters, these are large, complex organisations. So a complaint might escalate in the contact centre, but it originated because of a poor digital experience. The systems and teams along this journey are not necessarily connected.

“But spending on complaints doesn’t need to happen. There is technology available today that can infer your intent on digital property, recognise you’re having a poor experience in real-time, and interrupt the experience in a way that ‘nudges; you down a better path: Real Time Interaction Management (RTIM).

“If RTIM fails, the technology can send all of the details about your experience to a call centre agent that can use this information to deliver a personalised experience and de-escalate the situation in real-time. This has the added benefit of lowering the average handling time of the call and first-call resolution metrics, which are important for contact centres. Said another way, the best complaints are the ones that never needed to happen to begin with.”

Financial institutions are feeling the pressure too

While it is easy to point the finger and ask why firms aren’t consistently catering to their customers’ needs, this is easier said than done; as Daniel Seely, financial services lawyer at national law firm Freeths, explains.

“Complaint volumes are often said to run in parallel with the increase in wider economic challenges such as the recent cost of living crisis. This is because, in these types of times, consumers require increased support and flexibility from their service providers. This can include requesting payment holidays and extended repayment terms. It can also result in consumers needing to take out further borrowing and credit facilities to maintain their standard of living.

“For many consumers, the decision by a provider to offer such flexibility can be ‘make or break’ for an individual’s finances, and so these requests are deemed to be of high importance by the customer. For the same reasons, consumers often expect quick responses and agreeable outcomes from their providers. This in turn creates higher expectations by consumers, and increases their dissatisfaction should they not receive the outcome they need or in good time. As a result, complaint volumes subsequently increase.

“In light of the difficulties facing consumers, as well as the increasing level of regulatory oversight and enforcement action, firms need to be able to show that they understand customers’ needs and can demonstrate flexibility, understanding and support to customers in times of difficulty. This is, however, very much an ‘easier said than done’ situation – firms are also under increasing pressure from increased operating costs, staff shortages and regulatory obligations, all of which can increase during times of economic difficulty.

“These issues can quickly cause pressure points and blind spots to occur with their businesses and in their dealings with customers. This can include, for example, increased delays in response times for customer queries and requests for support, particularly in areas where demands are increasing owing to the wider economic challenges, as well as limiting the range of products and services which can be provided to customers, or the terms on which they are provided.”

Buy now, pay later (BNPL) offerings continue to grow in popularity across the UK. However, a distinct lack of protections in the space is leaving many Brits in debt they can’t afford to pay back, personal finance comparison site finder.com has warned.

An increasing number of Brits are using BNPL services despite the government being unlikely to introduce planned regulation to the sector in the UK ahead of the general election this year. If legislation was passed in the space, it would grant the Financial Conduct Authority (FCA) more power to regulate BNPL firms and protect consumers from unrestricted, easily accessible lending.

Fifty per cent of UK adults have used BNPL at some point, an estimated 26.4 million Brits, according to new research by finder.com. Fourteen per cent (around 7.7 million) of these also started using BNPL for the first time in 2023, despite it still being largely unregulated.

After announcing plans to regulate the sector in 2021, the government released a draft of new rules in 2023 but has yet to publish a response to the consultation that followed, despite pressure from the FCA.

According to Liz Edwards, editor-in-chief at finder.com, it’s a ‘total lottery’ whether or not Brits can afford to repay what they borrow from BNPL lenders, which do not have to perform checks before approving loans.

Edwards explains: “Consumers need the same protections in this sector that they get with other types of credit – they need proper information upfront, such as what the deal is and what happens if they miss a payment, and they need to be able to complain to the Financial Ombudsman if things go wrong, which currently, they can’t.

“When I spoke to the Financial Ombudsman’s office about BNPL complaints, it couldn’t tell me how many it had received as it doesn’t keep records for unregulated products, since it can’t investigate them.”

Late fees and damaged credit scores among the ‘hidden’ dangers

Many BNPL providers have now introduced fees to customers for making late payments. Generally, these providers cap late fees at a certain price point but charge customers if they do not make repayments on time in line with their plan – with some charged multiple times per order.

The research from finder.com also found that 53 per cent of those who used BNPL in the 12 months to January 2024 had paid at least one late fee, with the average amount paid sitting at £23.50. With this in mind, finder has also revealed concerns that this will negatively impact the credit scores of many who rely on BNPL without fully understanding the associated risk involved.

BNPL usage is particularly common among the younger generations, as 69 per cent of millennials (aged 24 to 42) and 68 per cent of gen Z (aged 18 to 23) have used it. However, while BNPL is becoming more popular, almost 38 per cent of Brits have never used the payment method and have no intention to use it in the future.

Changpeng “CZ” Zhao, who pleaded guilty to one felony charge as part of a settlement with the United States Department of Justice involving crypto exchange Binance, may not be permitted to leave the country as he awaits sentencing.

According to a Nov. 27 filing in U.S. District Court for the Western District of Washington at Seattle, Judge Richard Jones stayed a decision by a magistrate judge that would have allowed CZ to return to the United Arab Emirates (UAE), where he has a home and family members. The judge ordered that CZ would not be permitted to travel to the UAE until a court ruled on a motion from the U.S. government on the matter.

Zhao stepped down as CEO of Binance on Nov. 21 as part of a settlement with the U.S. Department of Justice, in which he pleaded guilty to one felony charge and agreed to pay $150 million to regulators. The agreement largely allowed the crypto exchange to avoid additional charges in exchange for roughly $4.3 billion in penalties.

This is a developing story, and further information will be added as it becomes available.