By Sara Costantini
The UK and Europe are in the midst of a cost of living crisis. All over the continent, people are reining in their spending as they adjust to skyrocketing inflation and the huge pressure it’s putting on their finances.
In the UK, the cost of energy bills has been the central focus of hardship, with the price cap increasing by 54% in April and now rising by a further 80% on in October. While the government’s intervention to cap average household energy costs will provide much relief, consumers simply can’t be shielded from all aspects of the cost of living increase.
In times of financial pressure, it’s normal for people to look to their bank for support as their main link to their finances. But the unprecedented circumstances we find ourselves in mean that, for financial services providers across Europe, their role in helping people weather uncertain economic times is more critical than ever.
To better understand this unprecedented situation, CRIF has undertaken a major piece of Europe-wide research. Surveying thousands of consumers across the continent, including in the UK, our report – Banking on Banks – provides new insight into current attitudes towards financial providers, as well how they can better meet customer needs during the rising cost of living.
People throughout Europe are taking drastic action to reduce their spending and many more know they’ll need to turn to others for financial support. 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.
Across the continent, banks and other financial providers rank consistently in the top three places people would turn to for financial support, along with families and government. In the UK specifically, banks are second only to government in terms where consumers would expect financial help to come from during difficult times.
Yet despite this perceived responsibility on financial services, for most people in the UK these major financial institutions are falling short. Two-thirds of people in the UK think banks need to do more to help consumers during difficult economic times, like those we are living through. And the sentiment is even more pronounced across the rest of Europe, particularly Italy where – astonishingly – nearly nine in ten consumers feel banks aren’t doing enough.
This poses a major challenge for banks – clearly there is an expectation of responsibility to support consumers during these times, but for the majority of people, banks must go much further.
So, what more do people want to see from their banks? Nearly half of those we spoke to in the UK said biggest ask was proactive engagement from their bank if they could save them money on monthly outgoings like their phone bill or car insurance. This was followed by earlier engagement if they predicted financial hardship on the horizon, along with products and services that, rather than being designed for mass markets, were tailored to their individual needs.
All of this is entirely possible in today’s modern world. Innovations like open banking are enabling providers to utilise customer data to build a more accurate picture of creditworthiness and lend with lower risk. As well as this, it is allowing providers to go further in analysing their customers’ financial information, personalise products for their needs and offer advanced warning of potential upcoming financial issues.
The UK financial services sector, in partnership with newer, financial and digital tech businesses, could make these asks a reality for more customers. However, there still exists a major barrier that needs to be overcome: trust.
When it comes to sharing data, people are still apprehensive to do so. Over half of Europeans worry about how their information is used by banks, with UK respondents expressing the most concern at 63%. And an even higher proportion say they are worried it would leave them open to fraud. Given that UK consumers are almost nine times more likely to be a victim of card fraud than Germans, this isn’t surprising.
But there are positive signs. 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.
The UK is recognised as a financial hub with a booming fintech sector. This puts it in a strong position to meet people’s needs during the cost of living crisis, further embracing advanced analytics and categorisation of data to provide more tailored products and services, and personalised support. But consumer concerns around trust and scepticism to sharing more financial information must be overcome for these benefits to be felt across the UK.
There now needs to be a concerted effort by financial providers to enhance their offer, partnering with those in the digital and financial technology space, to better meet the demands from customers for tailored services that help them better manage the rising of cost of living crisis.
As well as this, everyone working in the financial sector needs to work together to improve customer understanding of innovations like open banking and the benefits improved data and analytics they can bring, all without sacrificing security and safety. Only by doing so can we ensure more people can access the financial services and support they need to weather these trying times.
About the Author
Sara Costantini is CRIF’s Regional Director for the UK and Ireland. An industry leader with over 20 years’ experience in the insurance sector, Sara has been crucial in advancing CRIF’s work to develop the Insurance industry’s use of data, improving the customer experience and delivering a deeper understanding of their needs.