Definition Group asked 2,000 consumers about their understanding of key financial terms, and then tested what they really understood.
Most (83%) said they could explain ‘inflation’ – but when tested, only 57% picked the real definition from a list. Two thirds (65%) of people said they understood ‘APR’ – but only half (50%) got it right. Six in ten (63%) said they could explain BACS , but only two fifths (43%) defined it correctly. Just half (51%) could correctly identify what pay growth means.
The findings come as the FCA’s Consumer Duty forces financial institutions to make sure their communications are ‘clear, fair and not misleading’. Neil Taylor, Founder of Definition Group’s language consultancy Schwa, said: ‘This is a wake-up call to financial firms. Financial services firms suffer from what psychologists calls ‘the curse of knowledge’: they’re financial experts, it’s hard for them to imagine how little the rest of us understand – even when we think we do! The FCA is rightly pressing financial businesses to use language normal people actually get, and to get a move on: they need to have reviewed lots of their stuff by the end of April.’
One in five do not think communication from their bank is clear, and a third of people who have bought something on credit ended up paying more than they originally thought they would. More than a third (35%) of people who are struggling financially have made a mistake with their finances because they didn’t understand the wording,
A quarter (24%) of those with disabilities think that communication from their bank is confusing and are twice as likely to have made a mistake with their finances because they did not understand the wording (29%). More than half (55%) of parents to children with disabilities have opted into something with a bank or financial service that they did not need because they did not understand the wording, versus 18% of parents to children without disabilities.
Amy Graham, Head of Research at Definition Group’s customer experience consultancy Brand Vista, said: ‘What struck me about these results is all the things that make it less likely that you understand tricky financial terms: if you have a disability, if you’re struggling, if you have kids, if you’re young, even. All of these factors get in the way, because naturally you have bigger things to worry about. Financial firms need to think about the stresses people are under in real life while they’re trying to understand some gobbledygook in 20 pages of Ts & Cs.’
How to improve your comms quickly
Definition Group have launched a new Consumer Duty package to help financial firms make the changes Consumer Duty demands. It includes:
Qualitative research with your target audience to gauge how well they understand your current communications.
Scoring and rewriting your comms to make them clear and fair for every type of customer.
Quantitative testing to measure how the rewritten comms have improved.
Customer journey mapping, developing your customer experience and assistance.