INSIGHTS ¦ Overlooked and financially under-served

PWC report

Summary

This comprehensive report examines the financially under-served population in the UK, highlighting its growth and the significant challenges it faces in accessing credit. Jointly conducted by PwC and TotallyMoney, the research uses a robust methodology to size and characterize this demographic, underscoring the pressing need for industry and regulatory changes to accommodate an increasing segment of society that struggles with financial resilience due to limited credit options and economic pressures.

Key Points

  1. The financially under-served population in the UK is estimated to be 20.2 million people, or one in three adults, who find it challenging to access mainstream credit.
  2. This segment has grown by approximately 50% since 2016, fuelled by economic factors including the pandemic and rising living costs.
  3. The under-served population often lacks a robust understanding of their credit rating, impacting their financial decisions.
  4. Cross-industry collaboration is vital to increase transparency and trust among financially under-served individuals.
  5. The report identifies a need for regulatory adaptations, as recommended by the Woolard Review, to better serve this growing demographic.
  6. Financial fragility is a significant concern, with another 8.9 million people at risk of becoming under-served in the near future.
  7. Pandemic effects have disproportionately impacted the income of millions, exacerbating financial vulnerability.
  8. The rising cost of living has led to increased financial strain, pushing more individuals into the under-served category.
  9. A significant portion of the population would struggle to manage an unexpected expense of £300, highlighting the lack of financial safety nets.
  10. Alternative forms of employment, such as gig and part-time work, correlate with a higher likelihood of being financially under-served due to fluctuating incomes.
  11. The research emphasizes the need for credit products tailored to the unique needs of the financially under-served.
  12. There is an opportunity for financial services to innovate and offer new solutions that address the challenges faced by this demographic.
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Key Statistics

  • 20.2 million: Number of financially under-served adults in the UK in 2022.
  • 50%: Growth in the financially under-served population since 2016.
  • 8.9 million: Number of adults who are financially fragile and at risk of becoming under-served.
  • 29%: Increase in the number of UK adults with no credit history over the last six years.
  • £27k vs £34k: Average annual income of under-served vs non-under-served individuals.

Key Takeaways

  • Urgent Action Required: Immediate measures are necessary to prevent further financial exclusion amid escalating living costs.
  • Regulatory Reforms: Enhanced involvement of mainstream lenders in non-prime markets is crucial for improving access and equity in the financial sector.
  • Importance of Financial Education: Strengthening consumer understanding of credit systems and personal finance management can aid in resilience.
  • Innovative Credit Solutions: The development of credit products that cater to the unique challenges of the under-served is essential.
  • Collaborative Efforts: Cross-sector cooperation is needed to increase financial inclusivity.
  • Adaptability to Economic Changes: Financial services must be responsive to economic shifts that affect consumer affordability and credit access.
  • Support for Alternative Employment: Recognising the financial needs of gig and part-time workers is vital due to their growing numbers.
  • Enhanced Consumer Protection: Safeguards should be in place to prevent financial exploitation, especially in vulnerable demographics.
  • Utilisation of Data and Technology: Leveraging technology to provide better credit solutions and to educate consumers is a promising approach.
  • Focus on Financial Fragility: Addressing the needs of the financially fragile can prevent deeper financial crises.
  • Market Expansion: There is a significant market opportunity for services tailored to the financially under-served.
  • Comprehensive Support Systems: Integrated support systems can help mitigate the risks associated with unexpected financial shocks.

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