Members Only | 20/06/22

For UK consumers, the current economic climate continues to create challenges. As the cost of living increase continues to intensify, many are concerned that they will no longer be able to keep up with their regular monthly outgoings. In fact, the Office for Budget Responsibility, predicted that UK household real income in 2022 would contract at the sharpest rate since records began in the 1950s.

Recently UK consumer price inflation has risen sharply and significantly impacted the price of food, durables, consumer goods, fuel, and energy. Fuel costs are recognised as one of the biggest contributors to this rising inflation, with average petrol prices increasing by 12.6p per litre between February and March, the largest monthly increase since records began in 1990. The war in Ukraine is also contributing to this uncertainty.

For lenders, these unpredictable times are a cause for concern, significantly impacting the consumer’s ability to pay back credit. Creditors are looking for ways to not only mitigate risk, but also support their customers.

Before businesses can support struggling consumers, they need to identify them. According to one study, almost a third of businesses admit that they are ineffective at identifying at-risk consumers, while an inability to spot ‘early warning signs’ was a critical challenge for 27 per cent of respondents.

By running far more sophisticated affordability checks that factor in a range of credit, open banking and transactional data, lenders will benefit from greater insight around a person’s true financial position, allowing action to be taken immediately.

Should any at-risk factors be flagged, lenders then need to be able to proactively monitor these cases on an ongoing basis, regularly engaging with the individual to understand if their circumstances have changed and then taking the most appropriate action. This has been a long-standing challenge for those reliant on legacy technology or manual processes, especially as case volumes increase.

Specialist systems can digitally guide consumers through their money management journey, explaining their options in an easy to understand and step by step format. By utilising open banking data and smart software, these systems connect customer accounts, cards, debts, and assets, identifying the most appropriate and helpful offers available. These tools can be applied at all stages from acquisition through to recovery and should provide early warning of a customer struggling with their situation.

With the cost of living continuing to spiral, it’s crucial that banks and lenders are taking action to ensure positive financial outcomes for consumers and prevent a tidal wave of debt. For the consumer, knowing that they won’t have to have a difficult conversation over the phone or in-branch will also remove a hurdle that might previously have delayed them from seeking help.

To find out more about Aryza’s solutions visit www.aryza.com.