The UK is heading for recession. Inflation just hit a fresh 40-year high of 10.1 per cent as a sharp rise in petrol prices drove the rate towards double digits for the first time since 1982. Food prices rose 9.8 per cent in the year to June. The “squeezed middle” is growing and so too is demand for credit. Whilst the need for credit has never been greater there is unfortunately, rising declines for credit and this is forcing more people to borrow from unregulated lenders.
Being a ‘responsible lender’ is becoming increasingly difficult. As outlined by Fair For You Chief Executive Simon Dukes in this FT article “I would say we decline 90 per cent of applicants and that really troubles me… it’s harder now for us to find people to say ‘yes’ to as a responsible lender”.
The answer is to help people to improve their credit worthiness and build their financial resilience over time by providing tools and guidance they need, free of charge. But this remains a huge challenge as Siddharth Venkataramakrishnan points out: those who cannot access mainstream lending are also less likely to access budgeting tools.
Young people especially, who have had less time to build up savings, are facing a bleak financial landscape. According to Citizens Advice, young people are twice as likely to have used unregulated buy now pay later services to cover basic costs as the general population.
At Auden we are working very hard to provide those who find it difficult to access mainstream finance with either a responsible credit product – one they can afford that will help their situation – and / or a free money management app called Auden Money.
The app is designed to enable people to manage the money they have so they can begin to budget, categorise and forecast their spending. We're adding more features to the app in the coming weeks – a credit score checker and benefits maximiser - and our goal now is to work with our early adopters to find out how our app impacts their longer-term behaviours. So, it will be a mix of data analysis and listening to them.
Young people need finance providers who understand their particular challenges and can provide them with the tools to navigate a precarious economy and come out on top. Creating great apps and using the benefits of open banking data can give customers an accurate picture of their finances and enables lenders to offer the most appropriate and affordable loan products for their needs. What excites me about bringing new tech to financial services is that it allows for a dynamic relationship with customers where things can get better, as we help them move up the credit ladder, from subprime to mainstream.
Richard Bartlett is CEO of Auden.