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Cost-of-living crisis creates appetite to switch banks
As millions of Brits struggle with their finances, many view tailored financial services as beneficial
Over a third (35%) of people who are struggling financially during the current cost-of-living crisis would change their bank account provider if it meant they could access tailored financial support.
That is one of the findings of research by open banking technology supplier Tink, which also found that 46% of Brits are already “only just managing” to pay for essentials and fear they will not be able to do so in the future.
The current financial struggles of people across the world could spur further adoption of financial apps, just as the Covid-19 pandemic did, but for different reasons.
Tasha Chouhan, UK banking lead at Tink, said: “There is a clear opportunity to offer more support to struggling Brits as we deal with the biggest drop in income witnessed for decades. With the success of open banking, banks are today in the best possible position to embrace data-driven technology to develop tailored support, tools and communications. This will enable people to better manage their finances during difficult economic times, while improving customer engagement and shoring up long-term loyalty.”
The cost-of-living crisis is an opportunity for fintech firms and new banks to develop services to support customers during challenging times, as it did when Covid-19 hit the world. During the pandemic lockdowns of 2020, the need for people to avoid contact with others drove the adoption of digital banking. With high streets shut down for long periods, the take-up of financial technology exploded as people across all age groups turned to apps to manage their money.
According to the Tink research, 48% of respondents who considered themselves “only just managing” financially are using basic online banking tools and 24% prefer to manage their finances manually. “Banks can find ways to support these customers and build their confidence in transitioning to managing their finances digitally, while highlighting the benefits of personalised financial tools,” said the survey report.
Tasha Chouhan, Tink
It said 22% of those who are “only just managing” would like their bank to actively show them which providers have better deals and where savings can be made, and 22% would also like financial providers to suggest where they could be spending less each month.
It also revealed that 35% of these people would switch bank accounts if they were offered financial support to fit their needs. A total of 44% said they would change if a new bank could offer them advice on where they could save money.
In the final three months of 2022, more people than ever before switched current account providers, with 376,000 moving to a new bank. In November alone, more than 157,000 UK consumers moved their current account to a new bank using the government’s Current Account Switching Service (Cass), which is in its 10th year of operation.
The Tink research painted a bleak picture of the financial health of millions of people in the UK. It found that 25% of those who are “only just managing” have sold possessions to make money and 27% have used their savings.
One in five of this group expects to skip meals or make use of a food bank in the future, and 12% expect to miss a rent or mortgage payment as their financial situation worsens.
Read more about consumer tech choices in the cost-of-living crisis
- EY survey reveals that despite general demands for hybrid and remote working, UK households are concerned by rising home technology costs amid the cost-of-living crisis.
- The cost-of-living crisis could spur innovation in the fintech sector as consumers look for help with managing their finances.
- Current inclement economic times in the UK blow headwinds into mobile comms sector, shaking customer loyalty with operators as over two-fifths of contract customers think they are overpaying.