One in three people struggle to access credit
More than 20 million people are “underserved” by traditional moneylenders in the UK, and one in three adults struggle to access credit, new data shows.
Analysis by PwC and TotallyMoney shows that 20.2 million people in the UK are “financially underserved”, meaning they fall through the cracks of high street lenders due to limited credit histories, defaults on their credit report or low or volatile incomes, such as those who are self-employed or part of the gig economy.
This quasi-privileged group, holding credit cards with a higher APR, has grown by almost 50% in just six years, from 13.6 million in 2016, as the pandemic and the cost of living put additional pressure on consumers. people’s finances.
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A further 8.9 million people are more likely to fall into this category, half the total population, as the cost of living crisis deepens.
Simon Westcott, UK Head of Strategy and Financial Services at PwC UK, said: “There is no doubt that the long tail of the pandemic and the rising cost of living have put a strain on health people’s finances, which has contributed to an estimated 20.2 million adults struggling to get credit from traditional lenders.
“This, coupled with the fact that this population has grown by 50% over the past six years, shows how important it is for the financial services industry to take action to support the underserved.
“We have seen how fundamental the financial services sector has been during the pandemic, supporting small businesses and providing respite for owners, and here too there is an opportunity for lenders to improve existing proposals and offer new solutions that truly meet the needs of this large and diverse segment of society.
Even those with higher incomes now fall into the “financially fragile” group. A quarter (24%) of those with a gross personal income of less than £59,000 would use the credit to pay an unexpected £300 bill in the next 12 months, and 8% would even need to seek help from their family and friends.
In the same bracket, 17% admitted that they had not been able to afford things in the last 12 months that they could afford before.
Alastair Douglas, CEO of TotallyMoney, a free credit app, said: “The results show the underside of a broken market – and it’s too big an issue to ignore. An alarming increase in the underserved group, and millions more who are overwatering, is not just a symptom of the pandemic and the worst cost of living crisis in a generation, it’s also because the credit market is archaic; designed to keep data in the hands of businesses, not the people they belong to.
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“It is then those who are the least amortized who suffer the most. Not only do they find it difficult to access the credit they need, but the system excludes them from it, leaving them little choice but to turn to high-cost, short-term loans.When they can borrow, it’s often at a higher APR, which only adds fuel to the fire.
“The fact is that we need a credit market to serve a new economy; one in which consumer habits have changed and where regulation has rightly bought the demise of payday loans that exploited the most vulnerable in our society. The first step to solving this problem is cross-industry collaboration: credit reference agencies, lenders and fintechs who can defend the financial momentum. Brushing under the rug is no longer an option.
The data also showed that around three-quarters of adults in the UK are worried about the rising cost of living and 43% have already had to adjust their budget as a result.
PwC said it expects the rise in prices to mean the average UK household would have to pay an extra £2,500 in 2022/23 to buy the same goods and services they bought in 2021/22.
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