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These are difficult times in the UK, and in the current economic climate, consumers are experiencing some of the most significant pressures faced in decades.
While the cost of goods, petrol, food and energy soars, recent data from the Office for National Statistics (ONS) has shown that 87% of adults in the UK reported an increase in their cost of living in April 2022 — and the situation is similar across Europe. To make matters more difficult, the Bank of England recently raised interest rates to a 30-year high, signalling the longest recession in 100 years.
As the situation continues to worsen, some people will be faced with tough decisions between paying the heating bills, putting food on the table and struggling to pay for necessities.
It goes without saying that helping consumers survive the current crisis is a priority in the U.K and around the world. Although there is no easy fix, tough times often breed innovation – meaning that fintechs and financial services firms also have their part to play in helping consumers navigate a plethora of economic challenges.
To help ease the strain, here are a few key areas firms would do well to think about.
Budgeting and smart money management tools
In many ways, fintechs were built to solve crises – the industry was born out of the 2008 financial crisis – and helping consumers practice sound money management is a key service that financial services firms can provide.
Apps that put open banking and PSD2 standards to good use, connecting with an individual’s current account to provide personalised recommendations about their spending habits and where they can save money, can provide some peace of mind as costs remain high. These apps tend to have a raft of features, including spending categories to help people understand exactly where their money is going, so they can rein in their spending if necessary.
Likewise, championing financial education tools and budgeting trackers can provide essential support to consumers, helping them to better cope as difficult financial conditions prevail. London-based Nous, for example, has brought a dashboard to market that creates a tailored plan highlighting how customers’ bills might change in the months to come – meaning that people can make provisions and plan for the future, without any nasty surprises.
A new kind of lending?
For financial services firms and brands that principally offer credit products and services like Buy Now Pay Later (BNPL), these solutions can provide a lifeline and some much-needed flexibility to those struggling to make ends meet. However, there is a duty for businesses to lend responsibly and keep their customers fully informed on the potential risk to their creditworthiness and the broader consequences of not meeting repayment terms.
It is vital that brands focus on the user experience (UX) when developing these products, keeping their customers’ best intentions are heart – clearly signposting the conditions of the loan and integrating personalised, automatic, repayments for example, ensures that people can repay what they can afford each month, without falling into any trouble or unmanageable debt. Again, open banking models can also provide a holistic view of people’s finances and affordability checks, which can protect potentially vulnerable customers from problem debt or default.
Pensions with a difference
One subject that has been frequently discussed of late is upheaval in the pension markets, and the fact that a concerning proportion of savers are opting out of their workplace pension to access more of their income. Naturally, doing so can have a negative impact on consumers’ long-term financial prospects, meaning that they may not have enough money to live comfortably in later life.
Clearly, new and innovative solutions are required to help people free up more of their income while still maintaining their contributions. Companies that offer the functionality to redirect workplace pensions into a flexible access savings account and ‘salary exchange’, which offers savers a tax-efficient way of managing their contributions at a lower cost by taking a small tax cut, can guarantee that their customers are both prepared for the future and for now.
Whilst fintech may not be a sure-fire solution to solving the cost-of-living crisis, it can be a salve. If you are a fintech company with a bright idea for an innovative product, Yobota’s cloud-native platform and range of intelligent APIs means that you can create flexible, personalised financial products that keep the customer at the core. Get in touch today to learn more.