Fintech’s opportunity to help consumers with the cost of living crisis
Summary
As consumers’ worries multiply by the week, entrepreneurs in the digital finance space have an opportunity to prove the value of fintech.
The first chapter of the fintech boom was a broadly optimistic time for the economy. This translated into fintech apps and services that empowered consumers with new ways of growing and managing their money, including commission-free stock trading, robo advice, neobanks, and BNPL. Now, with the UK and global economies in mounting disarray, a fresh fintech opportunity is emerging.
Fintech has a potential role to play in helping consumers survive an ever-growing list of economic challenges, including a plunging pound, rising energy costs, and mortgage market turmoil. Tough times can lead to far-reaching innovation.
Three key areas for fintech founders to focus on are consumer lending, mortgages, and pensions.
Consumer lending is increasingly problematic and fraught with new risks. Marqeta recently surveyed 4,000 consumers, a quarter of them UK-based. Nearly half of the UK group (48%) said they were struggling to make minimum monthly credit card payments due to the increased cost of living. As such pressures mount, Marqeta found consumers becoming increasingly budgeting-aware and asking for from their credit card providers.
Many of the respondents in the Marqeta survey said they were looking for more personalised offerings and for non-traditional credit card rewards, like extra points or cashback on categories where they spend the most. Gen Z consumers were particularly interested in innovative credit options that could help them navigate the cost-of-living crisis. A substantial majority of 18-25-year-olds (63%) said they wanted more insight into their spending to help them manage their budgets more effectively.
The mortgage market is another area crying out for fintech innovation. There are a number of digital-first providers currently, but much of the market remains woefully slow and clunky, while just getting to the stage of being able to afford a mortgage is becoming increasingly hard.
If you are a first-time buyer today without the support of the ‘Bank of Mum and Dad’, saving the deposit for a house is a near-impossible challenge. Sky-high inflation has pushed up outgoings, making it harder than ever to save up a big enough deposit.