As the cost-of-living crisis continues, many financial institutions may be looking for new ways they can help their customers while meeting their regulatory obligations to support those most at risk of financial distress.
Against this backdrop, the latest research from Tink, Europe’s leading open banking platform, finds that almost one in four Brits (23%) are ‘financially vulnerable’ as their income no longer covers their essential spending. Of these, 56% say the situation will worsen as they expect their discretionary income to fall over the next 12 months.
As a result, some of them have already made difficult choices – one in five (20%) of the ‘financially vulnerable’ report having missed a monthly mortgage or rent payment, and a similar amount (22%) have cancelled financial products such as insurance.
Clear demand from ‘financially vulnerable’ consumers for more tailored support
With rising expectations for firms to put their customers’ needs first and deliver improved outcomes, there is a clear demand from consumers for more help. One in two (51%) of those categorised as ‘financially vulnerable’ agree banks should provide financial support to customers during the cost-of-living crisis.
Meanwhile, 43% of those identified as ‘financially vulnerable’ say they would like to learn more about managing their finances and how to optimise them, and more than half (58%) believe banks should make financial services more universally accessible.
What’s more, 45% of the ‘financially vulnerable’ would switch to another bank if it identified better deals or money saving opportunities for their monthly outgoings. A further 37% would make the switch if another bank provided them with the tailored financial support they need during this time.
Open banking key to supporting ‘financially vulnerable’ customers
Open banking-powered innovations in data and digital financial services offer institutions the opportunity to understand their customers better and coach them through difficult economic times, at the same time as meeting regulatory obligations.
Tasha Chouhan, UK & IE Banking Lead at Tink, commented on the research: “It is clear there is an appetite for more support from banks amongst those experiencing financial distress.
“Open banking has a vital role to play here – with data driven financial services giving financial institutions an opportunity to identify struggling customers and provide tailored support and interventions to assist them. Not only can this make a meaningful difference to people who are bearing the brunt of the cost-of-living crisis, it also helps financial institutions to meet enhanced regulatory requirements around protection of financially vulnerable customers.”