The need for UK banks to address financial fraud complaints adequately

By Gaia Lamperti

In the UK, the main reason customers are leaving their bank is the mishandling of complaints, recent research revealed. Released earlier this month, the 2021 Global Regulator Report by global software company Nuix found out that banks are failing to address complaints adequately, leading to a loss of customers.

Research showed that a quarter (25%) of UK banking customers who complained to their bank said they will change their bank as a result of how their complaint was dealt with. The number of complaints increased sharply during the Covid-19 pandemic with over 65% of the banking customers surveyed in the report declaring they had complained within the past 12 months.

The most common type of complaint was bank fraud, the main source of concern for customers in the aftermath of the pandemic, with 30% of them complaining to their bank as a result of being charged incorrectly and having a problem accessing their bank account.

“Our research finds that UK banking customers are more concerned about financial fraud since the Covid-19 pandemic began, with 6 in 10 people targeted by financially relevant email scams,” Andy Edler, Head of Corporate at Nuix, confirmed. “This type of cyber fraud has become a rising issue for businesses as well as consumers, especially with the move to remote working and the acceleration of digital transformation.”

Over 1 in 10 banking customers raised their complaints due to email (18%), telephone (17%), or mobile text messaging (14%) scams. “Business email compromise (BEC) is a specialist type of phishing attack that remains one of the most common and effective cyber tactics for fraudsters. The simple method only requires one slip up to inflict devastating effects on both companies and individuals by gaining access to files or even demanding the transfer of funds,” Edler added.

Yet almost a third (32%) of those who complained said their problem had not been resolved, showing that improvements need to be made to the customer complaints feedback loop.

“The impact of these systemic failings makes it imperative that organisations improve their processes, data analysis, and core systems to mitigate these issues and to maintain regulatory compliance. Failure to do this adequately not only impacts customer experience and reputation but exposes a greater enterprise risk. In today’s digital age, it’s not only essential for banks to improve technology to prevent fraud from occurring, but they must utilise the data at their disposal to address the customer feedback loop effectively and use this information to transform and future proof their business,” Edler said.

The report interviewed 31 financial services and competition regulators in 18 countries and found that 42% of regulators commenced investigations after receiving consumer complaints or tip-offs. At the same time, the study surveyed over 1,500 customers to examine the complaints process to understand future preparedness.

“With banking customers saying that bank fraud was a key reason for their complaint, banks need improved data analysis and insight to truly understand the root cause of complaints and to identify patterns and behaviours as they emerge,” commented Edler. “This will help determine the right customer treatment strategies, improve confidence and deliver a better customer experience. In addition, it will identify operational deficiencies, optimise channel effectiveness, and help reduce cost.”

Key findings of the report:

• Complaints made to banks increased during COVID-19
  • Over a third (39%) didn’t have a positive experience of their bank’s complaints process
  • More than a quarter (27%) of customers made an official complaint to their bank, the Ombudsman or both in the past 12 months. Incorrect charges or problems accessing their account appeared to be the most frequent complaints

• Bank fraud most common type of complaint
  • Over 1 in 5 (21%) said bank fraud was the main reason for their complaint
  • Almost a third (30%) of customers complained to their bank as a result of being charged incorrectly and having a problem accessing their bank account
  • Over 1 in 10 banking customers complained due to email (18%), telephone (17%), or mobile text messaging (14%) scams

• Rising fears over financial fraud 
  • Customers are feeling more concerned about financial fraud (69%) after the pandemic
  • Over 6 in 10 (61%) of banking customers were targeted with email scams during Covid-19

• Customers leaving due to complaints mishandling
  • A quarter (25%) of UK banking customers who complained said they wouldn’t use the same bank in future as a result of the company’s handling of their issue
  • Over a quarter (27%) complained to a combination of their bank and the Ombudsman, the latter of which can lead to fines and reputational issues