A recent report (Commentary on Aggregate Complaints Data 2010 H1) released by the FSA has ‘named and shamed’ for the first time those UK banks which have received the highest number of customer complaints during the first six months of 2010. Unsurprisingly, the media jumped on these statistics, and a plethora of lurid headlines has followed. Banker-bashing clearly remains a national sport – and will most likely continue to be for some time – so perhaps we should not be too surprised at this outcome. But if we look closely, there are some interesting facts behind the headline-grabbing numbers in the FSA's report.

Firstly, as an industry, the banking sector actually receives relatively few complaints overall: according to a report produced for Ofcom earlier this year, just 6% of the UK population make a complaint about their financial services provider each year, compared to 12% who complained about energy suppliers, and 23% who complained about suppliers of broadband and telephony services. In an industry as highly-regulated as financial services, that’s not actually a bad effort.

So what does this tell us? Well first of all, it tells us that complaints are a real commercial issue, and that regardless of how management sees complaint management today, there are sound business reasons for putting real time and resource into complaints going forward. There are two views of complaints in the banking sector: those who see complaint management as an unavoidable compliance issue, and those who see it as a chance to gain valuable feedback and learn from it. As such, the way in which lenders react to customers’ complaints and feedback is a key difference in terms of service levels within different organisations.

The secret to complaints handling is understanding what the issues are and what you need to do to improve your business. At its heart, complaints management is a management information (‘MI’) issue. If complaint volumes are going to be taken seriously as a business issue, a robust process for MI reporting is essential. Disparate legacy systems will make seamless complaints handling very difficult, as a unified view of complaints is impossible to achieve.

Strong MI reporting enables a lender to consolidate and analyse customer feedback in order to identify the root causes of customer dissatisfaction. By using MI reports to analyse this data, lenders can quickly and easily classify their customers' issues, feedback and complaints, and can then make informed decisions on identifying customer requirements, enhancing product design and improving service delivery.

At the same time, lenders can also adopt preventative measures that will reduce the chance of a complaint before it occurs. It won’t happen overnight – but if you can establish a single view of complaints, dealing with the root cause of these problems will become much easier.

Despite the best efforts of any lender, however, complaints will always occur, and there will always be more work to be done in this area. Lenders will therefore need to keep reviewing their processes to ensure that they are fair – and working as intended – and will also need to evaluate the consequences of any changes they make.

Software can help with this process, and in fact can also be used to establish and monitor key performance measures that reward staff for treating customers fairly, and also to identify when things go wrong. Showing how complaints affect the bottom line is key to success – showing how costs can be reduced or how the chance of getting a fine has been minimised will be the indicators that management looks for. A small investment upfront in proper complaints management can offset much larger costs further down the line.

Paul Clark, CEO, Charter UK, www.charter-uk.com