As the cost of living crisis rages, new research from European open banking platform, Tink, paints a stark picture of financial realities in the UK.
Findings from Tink reveal almost half (46 per cent) of people in the UK are ‘only just managing’, where they expect their income not to cover their essential spending in the future amid the cost-of-living crisis. A further one in four (23 per cent) are identified as ‘financially vulnerable’, with their current income already no longer covering their essential spending.
This represents a total of 37 million Brits who are currently either experiencing or expecting to face financial distress, It highlights 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 explores what many fear is around the corner as rising costs and the shrinking UK economy mean that their income will soon no longer cover their essential spending.
The cost of living crisis already has many people resorting to extreme measures. A quarter (25 per cent) of those defined as ‘only just managing’ have sold possessions to make cash and 27 per cent have used their savings to cover living expenses.
Meanwhile, a worrying one in five (19 per cent) people ‘only just managing’ expect to skip meals or make use of a food bank in the future. Furthermore, one in 10 (12 per cent) expect to miss a rent or mortgage payment as their financial situation worsens. A third (31 per cent) also believe they will have to resort to using credit cards more frequently, whilst one in five (20 per cent) expect to make greater use of deferred payment options in the future.
Brits trying their best to budget, but expect banks to do more
Many Brits are worried about keeping their head above water in the coming months. However, findings suggest they’re doing what they can to proactively manage their finances. Almost three in four (72 per cent) of those considered ‘only just managing’ believe they have a clear view of their finances, and two thirds (65 per cent) 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 per cent) of the ‘only just managing’ say they are using basic online banking tools. This suggests banks have an opportunity to educate people about more sophisticated digital tools to help them budget better.
Meanwhile, one in four (24 per cent) 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.
However, six in 10 (58 per cent) people ‘only just managing’ say they haven’t received a letter or email from their bank asking them to get in touch if they are struggling financially. Similarly, 62 per cent haven’t been contacted by their bank to signpost resources that could help with the cost of living crisis.
And it’s clear people expect more, as over half (55 per cent) of those ‘only just managing’ feel banks have an obligation to provide financial support to customers during the cost of living crisis.
Banks: the opportunities and expectations
There is clear appetite among consumers for products, services and tools that will help them improve their finances.
For instance, 22 per cent of those who are ‘only just managing’ would like their bank to actively demonstrate which providers offer better deals and where they can save money. A similar amount (22 per cent) 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 threat for banks. Tink’s research reveals over a third (35 per cent) of those ‘only just managing’ would switch banks to one that provided them with tailored financial support, and a further 44 per cent would jump ship if a bank provided recommendations on where they could save on spending.
Tasha Chouhan, UK and IE banking lead at Tink
Tasha Chouhan, UK and 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.”
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