FINANCIAL SERVICES
WITH HOUSEHOLD BUDGETS UNDER PRESSURE AND MANY CONSUMERS NEEDING A SHORT-TERM CASH FIX , HOW CAN LENDERS RETAIN TRUST IN DIFFICULT CIRCUMSTANCES ?
The International Monetary Fund ( IMF ) has tempered expectations of growth , saying that advanced economies in Europe and North America could see just a 1.4 % increase in economic output next year . It gives rise to the prospect of a recession in the near future .
The implications on lenders would be mixed : consumers turn away from mortgages during the bad times , but the rising cost of living may prompt some people to take out short-term loans to cover dayto-day expenses . Consumers will invariably tighten their belts , forcing lenders to become more creative and more adaptable around the loans they offer .
“ There ’ s a general expectation that as economic growth slows , there will be a reduction in new lending and more of a focus on the quality of existing lending ,” says Paul Randall , CEO of Creditinfo . “ There will be added pressure on what people can afford to do – for example pay their mortgages – especially as household budgets are squeezed .”
In challenging times , ‘ affordability is the name of the game ’ “ Affordability is the name of the game during an economic crisis ,” Randall says . “ If people can ’ t afford to repay their loans , lenders will inevitably tighten up their risk and reduce new lending . However , awarding loans should never be a blackand-white decision – not least because this underserves consumers and has a negative knock-on effect on the economy , as the flow of capital is consequently reduced .
“ Other options , such as the flexibility to adapt repayments or offer a smaller loan instead of none at all , will ensure customers are served without over-burdening them .”
“ There will be a need to support people who fall into financial difficulty ,” concurs Neil Kadagathur , CEO and Co-Founder of fintech lender Creditspring . He suggests making sure that borrowing costs are clear upfront ; taking a step back on late fees ; and keeping on top of changes to consumers ’ financial situations , particularly where it forces them to take out more than one short-term loan .
“ FINANCIAL SERVICES PROVIDERS SHOULD EMBRACE OPEN BANKING TECHNOLOGY TO ENABLE FASTER AND MORE ACCURATE CREDIT DECISIONS ”
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