Paul Speirs, Managing Director, Consumer Information Services, Experian UK&I
The economic climate is one of uncertainty, as living costs continue to strain the nation’s finances. Last year, household discretionary spending fell by 10%; and 61% of consumers acknowledged their finances have been impacted by the rise in the cost-of-living. This highlights the difficulty that many households have been grappling with regarding their financial health.
This means money management and the ability to navigate financial products has become more important to people. So too is the need for resources and guidance tailored to groups affected by the cost-of-living in differing ways.
Both financial providers and businesses have an important role to play in providing more support, whether that be through education or providing suitable access to services. There are still many consumers who suffer from a confidence gap when it comes to managing their finances. For example, we found that two-fifths (28 per cent) of young people don’t know how to budget.
Closing the confidence gap
One way to tackle the confidence gap is to have more open conversations around money, as we’ve found that the average Briton will wait until they have debt totalling £7,835 before seeking help. Greater transparency can help instil confidence in consumers to take control of their finances and explore the services available to them.
Most people will use some form of credit during various life stages, such as applying for a mortgage, or financing a car. If consumers lack an understanding of where they stand with their finances, and the credit options available to them, they risk being excluded; from both progressing in life stages and financially.
Many of the 5m people deemed as ‘credit’ invisible to lenders may be unaware that they are. Credit invisibles usually have a ‘thin’ or no credit file and will struggle to access mobile contracts and credit cards, and other forms of credit. To ensure everyone has credit access raising public awareness of the issue – like credit invisibility – is key.
At Experian, we’re aiming to bring all consumers into the mainstream credit economy. It involves mediating between informing consumers how their financial habits are measured by lenders, educating them on how to best improve their credit, and helping financial institutions provide them with a fair and balanced credit options.
Could businesses do more?
Nearly 60% of business admitted they could be doing more to educate people on how to manage their finances, according to Experian research. Improving the accessibility of their services for customers is another priority; over half (59%) stated they are considering or committing investment in services to help those with support needs better communicate with their business this year.
It’s in businesses’ best interest to educate their customers on how best manage their money. Financially savvy customers are more likely to be more retentive to services offered by businesses.
However, while there is an awareness from businesses to support the financial health of its customers, challenges remain. Budgets, restricted internal resources, or lack of technology in place are limiting the support business provide their customers.
But this responsibility should not sit exclusively with business. It is a priority that should be held across all essential services. The credit industry has a role in educating both businesses and consumers on how financial and credit markets work.
What can the credit industry do to help?
To make the right financial choices, business and consumers need to be well-informed and have access to support. It’s important the credit industry goes beyond its own offering to align with non-profits that provide education and support with the goal of improving financial health.
Better information and accessibility leads to improved financial health and Experian’s verification solutions can support this ambition. Work Report, can help employees quickly and simply share their verified employment and income information, helping them to apply for services like credit, mortgages and even new job roles.
With PayDashboard, employees can better engage with, and understand their payslip information, helping them to take control of their finances and improve their financial wellbeing.
Alongside access to their digital monthly payslip, the solution also offers a host of additional features to help engage and educate staff, reduce payroll-related queries, and make payday easier for payroll teams.
Collaboration with banks and other essential providers to improve accessibility is another key priority. There are roughly 16 million people living with some additional support needs, and often financial institutions don’t have the information to help them access services.
Late last year, we launched Support Hub, a free platform that allows consumers to share their access needs with multiple organisations in one go. It’s a testament to how data innovation can improve financial inclusion across the industry. But more importantly, it could not have been achieved without collaboration across the financial services landscape, with founding partners HSBC UK, Nationwide Building Society, Tesco Bank, NewDay, Co-operative Bank and Ovo.
Looking ahead, stronger collaboration between credit organisations, financial leaders and educational bodies is essential. All sectors must work together to raise awareness about financial empowerment, allowing individuals to access all available products, services, and support in the market.
