Sara Costantini, Regional Director for the UK and Ireland, CRIF
Across the continent people are grappling with the cost of living crisis and the threat of recession. To get through what’s this tough economic period, people are reining in their spending as they face mounting financial pressure.
In the UK, one of the biggest challenges has been the rising cost of energy, with the price cap increasing by 54% in April, and now rising by a further 80%. Although the government has acted to cap household energy costs, the recent announcement to only commit to 6 months rather 2 years of support has added extra uncertainty for families across the country. While consumers can’t be protected from every aspect of the cost of living crisis, for millions it really is crunch time.
European rankings
To better understand how consumers are reacting to the current financial crisis, CRIF carried out widespread European research, surveying thousands of people across the continent, including individuals in the UK. Our report – Banking on Banks – explores in detail current consumer attitudes towards banks and other financial providers, as well how financial institutions can better meet customer needs during this crisis.
Across Europe, banks and other financial providers rank consistently in the top three places people would turn to for financial support, along with families and government. People are not only reducing their spending by a considerable amount, but they’re also now more likely to turn to others for financial support. In fact, one in five people in the UK now expect to borrow more from their bank this year to cope with increasing financial pressure, the highest of all European markets we surveyed. In the UK, banks are second only to government in terms of where consumers would expect financial help to come from during trickier times.
Yet despite this, most people in Europe feel financial providers are not doing enough to support them. Two-thirds of people in the UK specifically think banks need to do more to help them during difficult economic times like the cost of living crisis. This outlook is also evident across the rest of Europe, especially in Italy where – astoundingly – nearly nine in ten consumers feel banks aren’t doing enough to support them.
This public perception has presented a major challenge for banks – evidently, they must do more to support their customers during the current economic downturn.
So, how can banks better support their customers?
Nearly half of those we surveyed in the UK said their biggest ask from banks was for more proactive engagement when they could save them money on monthly outgoings like their phone bill or car insurance. Consumers also want financial institutions such as banks and lenders to help predict any future financial adversity on the horizon, along with products and services that, rather than being designed for generalised markets, are tailored to their personal financial needs.
In 2022, predicting a consumer’s spending habits to develop tailored finance products and services is far from impossible; innovations like open banking now enable a multitude of providers to utilise customer data to build a more accurate picture of their financial status. Open banking allows providers to go further in analysing their customers’ financial information such as their creditworthiness as well as offer advanced warning of potential upcoming financial issues.
Overcoming the trust obstacle
The UK financial services sector, in partnership with newer, fresh-faced fintech firms, are beginning to implement these innovative predictive tools for customers. The biggest obstacle, however, is gaining and maintaining consumer trust.
When it comes to sharing data, it’s clear that people are uneasy. One in two (50%) of Europeans worry about how their data is being used and stored by financial providers, with UK respondents expressing the most concern at over six in ten (63%). An even higher proportion say they are concerned it would leave them open to fraud.
However, encouragingly, when the benefits of sharing their financial information are explained, specifically the potential to improve their ability to borrow or access higher credit limits, a third of consumers in the UK say they’d be prepared to share more of their data.
Partnering with innovative firms
The UK is a global financial hub with an ever-growing fintech sector. By utilising the expanse of innovative fintechs specialising in open banking and personalized financial products, financial institutions can better meet people’s needs. Banks need to embrace the advanced analytics and categorisation of data which fintechs can provide to offer more tailored products and services to financially strained customers.
However, consumer scepticism in sharing their financial data must be overcome for there to be advancement in the space. There needs to be a concerted effort by financial providers to enhance their services: by collaborating with those in the digital and financial technology space, banks can better meet the needs of their customers by offering tailored services that help them manage rising costs.
Those in the financial sector need to work altogether to improve customer understanding of innovations like open banking and the benefits which improved data and analytics can bring, all without sacrificing the security of their data. By doing so, financial services in the UK and Europe can ensure that as many people as possible can access the financial support they need to get through what are trying economic times.
