New data from the Bank of England reveals a significant surge in borrowing among British consumers, marking the highest increase in five years during the 12 months leading up to October.
This spike is attributed to an unprecedented financial strain stemming from the escalating cost of living crisis, leaving many individuals grappling to meet their financial obligations.
This is underscored by a recent Citizens Advice survey, indicating that a quarter of UK adults plan to utilise Buy Now Pay Later services to navigate Christmas expenditures. This percentage rises to over half for parents with young children.
The escalating number of Brits resorting to borrowing raises concerns, particularly in a nation where financial literacy is lacking, increasing the risk of individuals becoming entangled in a detrimental cycle of debt.
In light of this, Zahra Hassan, co-founder of Eligible – the UK’s first AI platform used by banks/lenders to provide consumers with bespoke financial expertise – discusses how there needs to be more proactivity on behalf of banks in talking Brits through their options and making sure they understand their financial products.
Moreover, the surge in borrowing coincides with the prevailing reluctance among many Brits to openly discuss matters of finance, rendering the topic of borrowing and debt somewhat of a taboo. Klarna’s findings highlight that a significant third of the British population feels uncomfortable broaching financial discussions with friends and family.
Adding to these concerns, a report from My Pension Expert indicates that a substantial 57% of the public expresses a lack of trust in financial advisers. Compounding the issue, traditional in-person banking institutions are rapidly closing branches, and communication is shifting predominantly to virtual platforms.
As face-to-face interactions diminish, there is a growing need to address the challenges associated with financial conversations and for financial institutions to personalise communication in an accessible manner to re-establish trust.
Hassan asserts that more needs to be done in optimising understanding of financial products. She maintains that with the advent of AI, banks now have the capacity to analyse customer’s interactions with different information and adapt accordingly.
This facilitates identifying knowledge gaps and personalising communication, both content and language, to better meet the diverse needs of their clientele. Drawing from her experience at Eligible, Hassan highlights the success of employing AI-led tools to achieve these objectives.
She contends that the implementation of such tools has resulted in a remarkable 300% increase in customer engagement rates.
Zahra hassan said, “What AI can do today is interact with customers and measure the level of understanding of their existing product before providing bespoke financial expertise. Based on this, we can start to form views on the likelihood that they could struggle to meet their payments.
“AI can be used to detect how well people understand their financial product and use this data to spot vulnerable customers in order to better educate and support them.”
“Banks excel at providing tailored support to large corporations or private banking clients. However, when dealing with a vast customer base of 10 million borrowers, hiring 300,000 account managers isn’t feasible.
“What’s needed – and what we’re doing at Eligible – is an active two-way dialogue, and AI-powered systems like Eligible facilitate this by initiating interactions with customers and monitoring their responses to gather insights.
“For instance, we proactively send educational content to customers to assess their anxiety levels and their understanding of their current financial products.
“Based on this information, we can fine-tune our approach by crafting more personalised educational content and adjusting our tone to be softer, supportive, and empathetic. This way, borrowers can better appreciate that lenders are here to assist them.”