Why aren’t banks doing more for customers with mental health problems?

Every challenge faced by a consumer who is well can be magnified for those with mental health problems. Seemingly simple tasks, such as picking up the telephone or replying to emails, can become daunting and even debilitating.

When working with customers who face these kinds of difficulties, it’s incumbent upon service providers to adapt. But doing so successfully poses unique challenges for retail banks.

We’ve identified four reasons behind this.

To set up a high-street bank account, customers typically need at least the following:

• Identity verification, e.g. driver’s licence or passport
• Proof of address, e.g. bank statements or bills.

But a driver’s licence requires a passport, which in the UK costs more than £70. This translates to over a week’s income for many of those on the standard Universal Credit allowance, and there’s no option to spread the cost.

What about utility bills? Well, these are also largely inaccessible to the unbanked, because many of the UK’s poorest customers rely on prepaid meters for their utilities – which can be topped up with cash and don’t issue bills at all.

Yet these are some of the people most in need of financial inclusion. Those living in financial difficulty are more than three times as likely to experience mental health problems. There is clearly urgent demand for banking to open its gates to these groups, but right now, the retail model isn’t cutting it.

The situation is especially frustrating because these checks (called know-your-customer, or KYC, protocols) are possible to implement quite painlessly.

A more up-to-date approach to KYC is what’s allowed challenger banks like Starling to implement video verification – accessible to nearly anyone with a smartphone.

Retail banks traditionally make the most money from their most affluent customers, because these customers deposit more funds that the bank can use for lending. This makes acquiring high-quality users competitive: a well-established account with money flowing to and from it is worth hundreds of pounds. (That’s why many banks can afford to offer such high switching rewards.)

The same doesn’t hold at the other end of the spectrum. Those who are new to banking, or who don’t have high levels of income and expenditure, don’t look so much like valuable ‘opportunities’. So for high-street banks, recruiting low-income customers – those disproportionately likely to suffer mental ill-health – is effectively disincentivised.

Mental health wasn’t always at the fore of public debate in the way it is now. For firms established in the last century, or in some cases hundreds of years ago, support for customers with these problems is a new addition. It has to be built into existing frameworks. That has implications for everything from customer service through to product development.

Overhauling legacy systems is difficult at scale. It requires greater will to initiate, and is more costly than doing the same in a smaller or newer company. In this respect, startups may have the advantage – not least because so many of them are founded on an ‘agile methodology’. That means they can easily adjust their processes to meet demand, and face less risk of becoming mired in bureaucracy as they evolve.

Geographical isolation is a key driver of social exclusion. With annual branch closures reaching the hundreds, and cash machine closures hitting the same volume on a monthly basis, some consumers are being left behind. The problem is especially severe because people in rural areas are disproportionately likely to suffer with long-term mental health conditions.

Branch closure would be less of a hurdle if retail banks’ processes weren’t still optimised for in-branch delivery. Some are now beginning to operate an online-first model, but user experience is still sufficiently poor that even tech-savvy customers are alienated by the complex interfaces.

Challenger banks, meanwhile, are largely mobile-first. They have user experience functions as a matter of course, and build products that meet customers where they are – which is no longer in branches, nor even on desktops. The lack of branches also keeps overheads low, creating savings that can be passed onto customers.

Taking a step back, there are grounds for optimism. Traditional banks may not be spearheading innovation in red tape removal, but they have plenty of experience dealing with vulnerable demographics. Startups, likewise, have much to learn about how to scale up inclusion programmes. With intelligent collaboration between both kinds of actor, the future of financial inclusion looks brighter.