CCR2 Vulnerability
Exploring the impact of COVID-19 on consumer credit
Kelli Fielding, managing director of consumer interactive for TransUnion in the UK talks to CCRMagazine about the effect of COVID-19 on consumer finances
How do you perceive that the ongoing pandemic has damaged the personal finances of consumers? TransUnion has been tracking the impact of the pandemic on consumer credit since March. This has given us a detailed view of changing financial circumstances here in the UK and showed that three out of five households have been negatively affected financially in that period. Our latest report illustrates that 69% of those impacted are concerned about paying bills, with the average expected shortfall currently over £600. The biggest worries are credit card repayments, utility bills and rent payments. Consumers have adapted, however, and
we found four in 10 people (41%) have set a budget and lived within their means during the pandemic. Discretionary spending has, of course, been hit hard with over half of UK households cutting back, and putting off big purchases like holidays and home improvements.
How prepared are finance providers to cope with this situation and to properly help customers come through it? Finance providers responded quickly to try and support consumers, aligned to the government’s response, with relief measures including payment holidays, or emergency payment freezes. One in five UK households have received a form of financial forbearance from their finance provider, according to our research, for the likes of mortgages and credit cards. This has had a steadying effect and it
appears that the initial financial shock has subsided, with 23% of households now saying they do not expect any future financial impact, up from 14% when our study began in March. Lenders should now be thinking
about the next phase and how they can support customers when these emergency
30
arrangements come to an end, particularly in light of the wider economic challenges and the scale of job losses. Our research shows that about a quarter of consumers (26%) are hoping to extend the financial forbearance they have in place, whilst over a third (35%) are looking to restructure their payment plans so they can catch up gradually.
What more should the industry be doing? Now, as at any time, finance providers need to ensure they are treating customers fairly in line with FCA guidance. Lenders must understand their customers, and the challenges they are facing, in order to spot potential vulnerabilities. This means utilising all the tools available to assess creditworthiness but also building trust by engaging with customers to help them through this challenging time. Tools like TransUnion’s white-labelled CreditView, which is used by leading banks, can offer customers access to their credit information and has been shown to build trust and loyalty. Our Consumer Credit 2020 report illustrates just how important this is, since more than a third of British consumers make their choice of finance provider based on trust.
Tackling fraud has also got to be a key
priority. We know that incidences of digital fraud attempts have increased during the pandemic, and that one in four UK households (27%) have been targeted. Lockdown and social distancing measures have given rise to a host of new scams and seen fraudsters targeting people at their most vulnerable. By May, COVID-19 fraud had cost the UK £3.6bn. To tackle this, firms need to be deploying multi-layered defences to help protect themselves and their customers – and that does not just apply to finance, but to retail and other sectors too.
What role will data and insights play in the coming period? Even before the pandemic, data was playing a vital role as consumer demands for convenience continued to drive competition and new product development. However, COVID-19 has brought this into even sharper focus and we’ve been working with businesses across both the private and public sectors to use data and insights to help them deal with some of the potential challenges they are facing, and modelling new solutions at pace tailored to specific business needs. In the finance sector, it’s crucial to have
In the finance sector, it is crucial to have comprehensive data available to help assess affordability and make informed risk assessments at a time when so many people may have become vulnerable due to unexpected income shocks
www.CCRMagazine.com
comprehensive data available to help assess affordability and make informed risk assessments at a time when so many people may have become vulnerable due to unexpected income shocks. Trended data and Open Banking are some of the tools that can help here, providing detailed insights into a consumer’s spending, and ensuring a rounded and accurate view, whilst also providing early visibility of the warning signs of potential financial stress.
Where can the industry look for help in these exceptional times? Collaboration is key at a time like this. The UK’s leading credit reference agencies (CRA),
August 2020
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52