What could 2019 look like for lenders and customers?

In the past two decades, the lending landscape has changed beyond recognition. With technological advancements influencing the way businesses operate and consumer expectations, the lending industry needs to increasingly adapt to changing demands. As we enter 2019, it is clear that political and economic uncertainty will continue to have an impact on consumer decisions. The lending sector must consider the needs and pressures for the modern consumers and offer them clarity in uncertain times.

Today’s consumers have access to a larger range of loan products and providers than ever before. In many ways, this is a good thing. Competition in the market tends to encourage providers to make their products as attractive as possible to consumers, either with lower rates or better service. 

What is increasingly apparent, however, is that the amount of choice is leaving consumers confused rather than empowered. Freedom Finance’s research shows that nearly half of UK adults feel anxious or overwhelmed by the process of making financial decisions.

This is creating a knock-on effect, with more than a third of UK consumers regularly delaying or giving up on important decisions about their finances. People are experiencing personal finance paralysis when consolidating credit cards or loans or switching to more competitive mortgage rates. A Freedom Finance study, developed with Professor David Hillier revealed that Britons are set to lose £1,598 in 2019, if they do not consolidate their finances or switch to a better deal.

Borrowers are being blinded by choice, and in many cases, no decision at all is making their financial situations more difficult.

As interest rates have the potential to rise in 2019, consumers stand to lose even more money if decisions are not carefully considered and acted on. The scale of personal finance indecision and its impact on households should be a cause of concern. The lending sector must bring clarity to consumers so that decision-making is clearer and simpler.

In some cases, providers have overwhelmed consumers with complicated and often unnecessary information. Instead, what they should be doing is ensuring that clarity and education is at the forefront for customers, helping them to make well-informed decisions about their finances.

Increased clarity and communication from lenders and other financial service providers is a critical step in improving the way people choose and manage their debt. Increasingly, this is what consumers demand – 71% of people across the UK said they want more clarity from financial service providers about which financial products they qualify for and which are right for them.

Consumers want and deserve to understand exactly how a loan or product works, and how much they will have to repay. Terms and conditions (T&Cs) and unnecessary financial jargon can contribute to the feeling of anxiety and have the potential to alienate consumers. According to Freedom Finance’s research, a quarter of the UK’s consumers are worried about agreeing to T&Cs they don’t understand, and 41% think personal finance service providers should make T&Cs simpler. The financial industry has a responsibility to ensure that they supply consumers with options that are easy to understand.

What is more, the number of customers using mobile devices or web platforms to access financial products and services is growing rapidly, and financial providers should consider adapting small print to meet requirements that work effectively for tablets and smartphones.

Financial service providers should focus on helping consumers feel empowered, particularly as 2019 already looks like a year of change. With Brexit on the horizon, what consumers need is the knowledge and confidence to make important personal finance decisions that benefit them, helping them break the cycle of personal finance paralysis.

Brian Brodie, Group Chief Executive, Freedom Finance