As the cost of living crisis continues, new research from Europe’s leading open banking platform, Tink, paints a stark picture of financial realities in the UK.
Findings reveal almost half (46%) of people in the UK are ‘only just managing’, where they expect their income not to cover their essential spending in the future. A further one in four (23%) are identified as ‘financially vulnerable’, with their current income already no longer covering their essential spending.
Based on the findings, this represents an estimated 37 million Brits who are currently either experiencing or expecting to face financial distress – highlighting the critical role of banks to support people with their finances during these unprecedented times.
Many ‘only just managing’ fear the worst is yet to come
The research set out to understand how those who are ‘only just managing’ are currently coping with the rising cost of living. It also explores what many fear is around the corner as rising costs and challenging times for the economy mean that their income may soon no longer cover their essential spending.
The cost of living crisis already has many people resorting to measures that mitigate their situation. A quarter (25%) of those defined as ‘only just managing’ have sold possessions to make money and 27% have used their savings to cover living expenses.
Meanwhile, findings suggest that one in five (19%) people ‘only just managing’ expect to skip meals or make use of a food bank in the future, and one in ten (12%) expect to miss a rent or mortgage payment as their financial situation worsens. A third (31%) also believe they will need to use credit cards more frequently, whilst one in five (20%) expect to make greater use of deferred payment options in the future.
Brits trying their best to budget
Many Brits may be worried about how to get through the coming months, but findings suggest they’re doing what they can to proactively manage their finances. Almost three in four (72%) of those considered ‘only just managing’ believe they have a clear view of their finances, and two thirds (65%) say they try to keep on top of their expenditure but struggle to keep up with constant price increases.
However, the findings show that many are not able to make the most of the digital tools that could help them. Almost half (48%) of the ‘only just managing’ say they are using basic online banking tools, suggesting banks have an opportunity to educate people about more sophisticated digital tools to help them budget better.
Meanwhile, one in four (24%) of the ‘only just managing’ still prefer to manage their finances manually. Here, banks can find ways to support these customers and build their confidence in transitioning to managing their finances digitally, while highlighting the benefits of personalised financial tools.
Banks: the opportunities and expectations
There is a clear appetite among consumers for products, services and tools that will help them improve their finances, as over half (55%) of those ‘only just managing’ agree banks should provide financial support to customers during the cost of living crisis.
For instance, over one in five (22%) of those ‘only just managing’ would like their bank to actively show them which providers have better deals and where savings can be made. A similar amount (22%) would also like their financial providers to suggest where they could be spending less each month.
With the UK’s Current Account Switching Service (CASS) reporting a record quarter for bank account switching, it’s clear more people than ever are willing to move their money for a better deal. The current economic context provides both an opportunity and a challenge for banks. Tink’s research reveals over a third (35%) of those ‘only just managing’ would switch banks to one that provided them with tailored financial support, and a further 44% would jump ship to a bank that provided recommendations on where they could save on spending
Tasha Chouhan, UK & IE Banking Lead at Tink, commented on the research: “There is a clear opportunity to offer more support to struggling Brits as we deal with the biggest drop in income witnessed for decades. With the success of open banking, banks are today in the best possible position to embrace data-driven technology to develop tailored support, tools and communications. This will enable people to better manage their finances during difficult economic times, while improving customer engagement and shoring up long-term loyalty.”