Key Takeaways:
- Over 11 million financially vulnerable individuals in the UK resort to loans for everyday expenses, double the national average.
- Despite increasing reliance on credit, access to affordable credit options declines, with 40% reporting worsened access since the pandemic.
- Calls for lenders to offer better support and utilize technology to predict financial vulnerability and provide personalized solutions.
London, February 8th, 2024: As economic uncertainty looms large, a startling revelation has emerged – over 11.5 million financially vulnerable individuals in the UK are forced to rely on loans to meet their everyday expenses, painting a grim picture of financial instability amidst soaring living costs and declining access to credit options. Research conducted by Fuse, an AI-powered transaction analytics firm, sheds light on the alarming trends in financial vulnerability and access to credit, raising questions about the role of banks and the efficacy of current support measures.
A Growing Crisis: Reliance on Credit Soars
The findings from Fuse’s research unveil a stark reality – financial vulnerability is rampant across the UK, with millions of individuals teetering on the brink of financial ruin. Over 11 million people, defined as financially vulnerable due to past debt experiences, are left with no choice but to turn to loans to cover essential expenses, representing a staggering 39% of the financially vulnerable population. This reliance on credit is more than double the national average, painting a troubling picture of widespread financial distress and insecurity.
Access to Credit Plummets Amidst Rising Living Costs
Despite the increasing reliance on credit, access to affordable credit options is on a downward spiral, exacerbating the plight of financially vulnerable individuals. A concerning 40% report a worsening of access to credit since the onset of the pandemic, a trend that is further compounded by declining affordability measures and stringent lending criteria. Shockingly, over a third (35%) of financially vulnerable individuals struggle to access vital credit products necessary for survival, far surpassing the national average of 14%. This alarming disparity underscores the urgent need for effective support solutions and measures to safeguard vulnerable borrowers from falling deeper into financial distress.
Quote from Sho Sugihara, CEO and Co-Founder of Fuse: “The financially vulnerable are in danger of being left behind as the UK’s financial gap continues to widen. Many people are solely reliant on credit to pay for everyday expenses and, in some cases, keep a roof over their heads. However, it is hugely concerning that access to affordable credit options is plummeting at the exact moment when reliance on credit is spiking.”
Calls for Enhanced Support and Utilization of Technology
Amidst mounting concerns, there are growing calls for lenders to step up and offer more effective support to borrowers grappling with financial vulnerability. Harnessing the power of technology and AI-led insights, lenders can play a pivotal role in predicting changes in affordability, identifying the probability of default, and assessing levels of financial vulnerability before they escalate. This proactive approach is essential in fostering a more inclusive financial system that prioritizes the needs and well-being of vulnerable borrowers, offering personalized solutions tailored to their unique circumstances.
Quote from Sho Sugihara, CEO and Co-Founder of Fuse: “The entire financial sector, not just banks, could be doing more to protect borrowers – but there needs to be better support solutions. Embracing technology and AI-led insights assists lenders during affordability testing to ensure not only more accurate credit decisions but also more personalised, effective support solutions – a vital step in creating a more inclusive financial system with improved outcomes, especially for financially vulnerable borrowers.”
Empowering Change Through Technology
Fuse’s innovative product, Health Signals, stands at the forefront of driving positive change in the financial landscape. Designed to support lenders in meeting Consumer Duty requirements, Health Signals offers invaluable insights into areas of vulnerability, predicts arrears risk, and monitors the impact of financial products on customers. By leveraging data-driven solutions, lenders can empower borrowers with greater financial literacy, resilience, and access to credit, paving the way for a more equitable and sustainable future.
About Fuse and Pave: Fuse, a B2B solution developed by Pave, offers lenders enhanced credit options and data insights to support improved decision-making. Pave, a subscription-based credit health builder app, seeks to promote financial equality by leveraging Open Banking insights to empower consumers and businesses. Together, Fuse and Pave strive to bridge the gap in financial accessibility and empower millions across the UK.
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