Reducing the true cost of complaints with Operational Excellence

Written by Josh Marlow
05 Mar 2024
Financial Services Complaints Operational Excellence
Man riding upwards on a steep hill on a mountain bike.

Organisations within Financial Services continue to spend £millions each year on their complaint operation.

Whilst executives may be thinking about prioritising growth and modernisation across the next financial year, it’s crucial that operational efficiency remains front of mind, to ensure the delivery of good customer outcomes and compliance to the regulatory bar.

Complaint reduction is also essential for sustainable growth. Not only that, but it demonstrates an investment and ongoing commitment to continuously improve the experience offered for existing customers, whilst simultaneously trying to acquire new ones.

Getting things wrong is expensive, and getting things right consistently is difficult – but worthwhile. It all starts with your operating model, and the actions you’re taking to optimise it. Can you afford to not invest in operational excellence to sustainably reduce complaints?

Customer complaints cost organisations £millions each year

The FCA reported over £230million was paid in redress alone in H1 2023, with >£25million of that being for complaints which aren’t upheld. Whilst these figures are lower than in some previous years as a result of a decrease in redress paid for payment protection insurance complaints, organisations are still spending tens of millions of pounds in compensating for poor outcomes, and poor customer journeys.

In addition to this, large organisations are exposed to costs of up to £8million per year in fees for complaints that have been referred to the Financial Ombudsman Service (FOS).

Of course, redress and remediation costs, and referral fees, are not the only source of operational expenditure associated with complaint handling. In our experience, organisations will have the majority, if not all of the following as part of their complaint handling infrastructure:

  • Specialised complaint handlers to service customers;
  • Team leaders and supporting structures to manage the operation;
  • A dedicated forecasting team to predict demand;
  • Strategy and process owners who define the business intent;
  • Supporting functions to enable the development of new employees, such as trainers and coaches;
  • Internal quality assurance teams to validate customer outcomes, including customer journey testing;
  • Risk Management professionals to identify and manage operational risks;
  • Complaint reduction or root cause analysis experts.

Our insight and industry experience leads us to believe that the cost to handle each complaint for Financial Service organisations can be as high as £300, with direct operating costs accounting for over 40% of the total cost to serve for some complaints functions.

Apart from the cost, why should I care?

Organisations should constantly challenge themselves to view their business practices through the eyes of the customer. Not only do greater levels of customer satisfaction lead to repeat business, (with 28% of customers that reported high levels of customer satisfaction, also stating they’ll look to buy more products or services from the organisation) they can also support organisations in achieving better financial results and greater productivity.

As UKCSI report:

“Organisations that consistently earn higher levels of satisfaction than others in their sector also tend to achieve stronger levels of EBITDA and revenue per employee. An organisation’s customer experience therefore needs to be seen as an asset and a source of value, rather than just as a cost centre.” UKCSI report 2023

How you treat dissatisfied customers, or complainants, is a key contributor to those satisfaction levels. Responding to customers in an acceptable timeframe, and providing a satisfactory resolution, are two of the critical factors within this. Organisations can only decipher what this means to them by truly understanding the specific requirements of their own customers. What is acceptable to one customer, in one scenario, may not be acceptable to another.

Similarly, putting customers first remains top of the regulatory agenda. In the FCA’s ongoing investigation into historical motor finance commission arrangements, we see further indication of their intent to ensure all customers receive fair value for the products and services they purchase.

Operational Excellence could reduce cost to serve by 20-50% and increase satisfaction

By focusing on end-to-end customer journeys, opportunities exist for organisations to significantly reduce the volume of complaints they receive – reducing cost to serve and providing better customer outcomes. Based on our experience, we anticipate that Financial Services organisations with medium-large sized complaints operations could save anywhere between £2 - £20million per year, with a 30% reduction in volume, when applying the principles of operational excellence.

So how can firms achieve this?

  • Review your end-to-end customer journey, identifying potential complaint drivers across the value stream
  • Root Cause Analysis – fully understand the true root causes behind the complaints that materialise
  • Translate these data points into truly actionable insights – utilise machine learning and predictive analytics to drive the correct behaviours and manage risk
  • Empower your team to increase first contact resolution
  • Optimise the operating model to remove bottlenecks and reduce touchpoints
  • Enhance agent skillset to get to the heart of each complaint and reduce the likelihood of repeat contacts – empathetic listening is vital!
  • Make people accountable – reducing complaints is a business target, not just a target of the complaints function

At BFY, we have extensive experience in supporting complaint reduction and process optimisation across industries. This includes rapid mobilisation of support to deal with urgent interventions, as well as the delivery of long-term, sustainable improvements.

Recently, we helped a client to increase same/next day closures by 65%, and realised ~£7.5m in cost avoidance through efficiency gains and a reduction in Ombudsman referrals.

If you’d like to know more about improving complaints performance in Financial Services, contact Josh Marlow.

Josh Marlow

Josh specialises in Lean Transformation, helping clients to achieve Operational Excellence by optimising processes and improving customer journeys.

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