CREDIT MANAGEMENT JULY and August 2022

CMNEWS
A round-up of news stories from the
world of consumer and commercial credit.
Credit card spending
returns to pre-COVID levels
CREDIT card spending and
personal loan borrowing
both increased in the first
quarter of 2022, returning to
pre-COVID trends as the last
restrictions were ended.
Total credit card spending was
£50.4bn, with March seeing the second
highest spending since the pandemic.
There was a significant increase in
credit card spending on travel as
international holiday bookings took off.
Following sharp falls during the
pandemic, outstanding credit card
balances were broadly static over the
quarter at £56bn. There were £4.7bn
of new personal loans made by high
street banks in the first quarter.
The data, published in June by
UK Finance, also suggests that the
growth in savings eased, following
substantial rises through 2020 and
2021. In total, there is £1.1trn held in
savings accounts, of which 84 percent
Written by – Sean Feast FCICM
is in instant access accounts. Overdraft
usage rose during the first quarter but
remains below pre-pandemic norms.
Total overdraft debt of c.£5.5bn is
around 15 percent below the amount
seen in 2019.
Eric Leenders, Managing Director
of Personal Finance at UK Finance,
believes that some people, particularly
those on lower incomes, will already be
feeling the strain: “There are significant
additional pressures on household
finances in the second quarter, most
notably from energy price rises and tax
changes. Our analysis shows that this
year there will be a three percent fall
in disposable incomes for the average
mortgaged household, which may
result in more subdued spending and
borrowing.
“Any customers worried about
meeting their loan payments should
speak to their lender early to discuss
the tailored support available to them.
Leenders won't put customers on a
plan that they can’t afford.”
The report was compiled in
collaboration with Accenture.
Krishnapriya Banerjee, Managing
Director in Accenture’s UK banking
practice, says that the first quarter
painted a fairly stable picture of the
UK’s household finances: “Further
potential interest rate hikes and energy
price booms mean the full effects
of the soaring cost of living have
yet to bite into household budgets:
“Although many banks have started
making provisions to support their
most vulnerable customers, they also
need to focus on communicating their
empathy for consumers affected by
this crisis,” she says.
“Banks need to strike the perfect
balance of delivering digital services
and human-centric banking to help
customers navigate this challenging
situation.”
“There are significant additional pressures on household finances
in the second quarter, most notably from energy price rises and tax changes.’’
BNPL lending looks set to double in 2022
THE growth in Consumer Credit
lending is being rapidly outpaced by the
Buy Now Pay Later market according
to Freedom Finance, one of the UK’s
leading digital lending marketplaces.
BNPL lending is estimated to increase
by 52 percent to well over £20bn in 2022
compared to the previous year. The FCA
estimated that the industry was worth
£2.7bn in 2020 but it has seen rapid
expansion since.
Overall, consumer credit which
includes personal loans and products
like car finance has seen a 12-month
growth rate of 5.7 percent. However,
this does not account for BNPL lending
which has caused concern among
industry participants and the regulator,
as reports about its everyday use rise.
Michael Davidson, Chief Revenue
Officer at Freedom Finance, one
of the UK’s leading digital lending
marketplaces, believes there is a clear
behavioural shift being driven by
the growth in online shopping and
increasing trust in digital lending:
“That is why the industry and regulator
are reacting to the rise in this type
of lending, as consumer demand
accelerates innovation in the embedded
finance sector,” he says.
“While BNPL is clearly the most
well-known product, embedded finance
has many more credit opportunities
– that retail and other sectors are
beginning to take advantage of – as
credit and financial services are
integrated into a broad range of online
users experiences. Many retailers and
businesses in other sectors are rapidly
expanding the range of embedded credit
options they can provide to help their
customers with genuine lifestyle finance
needs.
“There is a danger that the focus of
BNPL as part of the recent embedded
finance movement combined with a
cost-of-living squeeze could leave other
viable credit options in the shadows.
Product choice in this space is essential
to ensure customers get the right credit
for their needs rather than the quickest,
easiest option that may not necessarily
be the best.”
Brave | Curious | Resilient / www.cicm.com / July & August 2022 / PAGE 5