Borrowers’ changing attitudes create new opportunities for lenders

The UK’s consumers are bracing for the third hit in a triple whammy of economic disruption. Brexit, Covid-19, and now a severe cost of living crisis. These are all testing the patience and the pockets of everyone who calls the UK home.

The shockwaves are being felt in different ways, as confirmed by the findings of our latest research report. Today’s borrowers across the UK now represent a newly fragmented multiplicity of needs. This isn’t bad news for lenders; it just means the landscape has changed - and will continue to change - faster and more dramatically. And change brings opportunity. In this case, to champion the creation of customised credit products to match these newly evolving consumer requirements.

Demand is being shaped by a variety of factors, and the criteria by which consumers evaluate and select loan products is changing too. For success, lenders must now "go a level deeper". They need to be prepared to offer customised and flexible products. These need to be designed to cater for a less predictable future while still helping customers meet their financial needs and goals.

Building offerings around customers isn’t simply good business, however. It will soon be law of the land after a new initiative from the Financial Conduct Authority (FCA) takes effect. According to one of the key aims of the FCA’s new Consumer Duty proposal, “Firms must consistently place consumers ’ interests at the centre of their businesses by going beyond compliance with specific rules, to focus on delivering good outcomes for consumers.”

So, if consumers want—and need—flexible, personalised loan products, and the FCA wants lenders to give consumers what they need, what will enable this type of customised loan offering? Intuitive, innovative tech that allows lenders to adjust interest rates and restructure payment plans based on perpetually updated risk profiles.

These profiles must be multidimensional and incorporate elements such as: spending habits, savings, outstanding court judgements, employment status, to deliver the personalisation needed and expected by today’s consumers.

Already, the availability of aggregated payments data via open banking APIs allows lenders to apply greater depth to their customer risk profiling. This, in turn, has paved the way for the development of credit products. Products that are better tailored to individuals, and their unique circumstances, and that carry more attractive rates.

Our data indicates that consumer acceptance of such practices is growing, too. Today’s borrowers have grown more accustomed to the cross-referencing and analysis made possible by the new era of open banking.

In fact, our research found that, as of 2021, only 30% of borrowers would now deny a lender access to their payment history, which represents a 10% drop compared to 2019.

Yet, our research also shows that, while technology that enables access to better customer data is critical to creating customised offerings, it’s not enough to guarantee success in today’s marketplace. Lenders must also undergo a cultural and policy shift towards flexibility.

Consider this: in 2019 and 2020, our survey found that 39% of 25 – 44-year-olds expressed interest in a rolling credit product that can fluctuate, by interest rate and monthly payment, and allows for debt restructuring according to changing circumstances.

Fast forward to 2021, when continuing uncertainty caused a massive jump in consumer appetites for this type of product. According to this year’s survey, nearly three quarters of respondents (74%) confirmed their interest in an ‘elastic’ line of credit.

To this end, the findings suggest that the way forward through the current uncertainty will require lenders to use the smartest tech to greatest effect.

This technology takes into account, and prioritises, each individual customer’s goals and needs. It aggregates borrowing history and assimilates the affordability of offerings for any individual, also indicating the degree to which a lender can demonstrate flexibility during times of difficulty.

Ultimately the goal is personalised offerings and intelligent, flexible loan management at scale. This will only occur when lenders embrace intuitive and innovative tech that enables greater agility and automation.

With such technology, lenders will have the tools to assimilate the myriad factors shaping customer attitudes. Only with this, will it be possible to unlock the opportunity with real-time data on customer decision-making processes and trends.

For more insights into factors driving consumer attitudes, take a look at our full report.