FINANCIAL SERVICES
“ TRADITIONALLY , THERE HAS BEEN WIDESPREAD DISTRUST OF LENDERS AND , UNFORTUNATELY , THIS REMAINS THE CASE ”
NEIL KADAGATHUR CREDITSPRING
How can lenders win consumer trust in these trying times ? There ’ s an argument that short-term lenders – particularly buy-now-pay-later ( BNPL ) – have lost their halo post-Covid . Creditspring ’ s Neil Kadagathur argues that many BNPL customers didn ’ t understand the implications of falling behind on repayments , with nearly half of respondents in one survey unaware that they could be referred to a debt collector for missing a BNPL payment . It ’ s a worrying state of affairs . Recessions have a way of creating the unfortunate illusion that lenders are profiting off the desperation of hardpressed consumers .
“ Traditionally , there has been widespread distrust of lenders and , unfortunately , this remains the case ,” Kadagathur explains . “ The lending industry has often been seen as focused on profits over customer wellbeing – over four in ten ( 43 %) people believe lenders encourage them to take out more money than they can afford , and fewer than one in five ( 17 %) see lenders as responsible businesses that care about their financial wellbeing .
“ Over the next few months , lenders are likely to see increased applications from borrowers due to the cost-of-living crisis – and the focus from lenders should be ensuring that they offer proper support . Stringent affordability checks are vital to protect borrowers and ensure they aren ’ t overlending , which puts borrowers at increased risk of debt . For this , an integrated tech approach using open banking to review financial information with the borrower ’ s permission can ensure more accurate and quicker decisions around borrower affordability , streamlining the process but also providing more support to borrowers at a time when they need it most .”
Paul Randall continues : “ During an economic downturn , the borrower profiles that lenders
124 November 2022