Younger people’s finances have been hit hardest by the pandemic, and they are increasingly willing to securely share their bank transaction data to get access to financial products that can help them weather the storm, according to the latest findings from Credit Kudos’ Borrowing Index.
The research found that Under 35s are three times more likely to have seen their income negatively impacted by the pandemic than older people (36% compared to 13% of over 55s). This fluctuation in income over the previous year has made it difficult for lenders to ensure they are lending responsibly without up-to-date information on someone’s financial situation. However, at the same time financial products that can help mitigate temporary shortfalls, like credit, are increasingly needed – younger adults are far more likely to say they ‘have never needed credit more’ (26% compared to 6% of over 55s).
Despite this demand, the under 35s are nine times more likely to have been turned down for borrowing since the pandemic began. Almost one in five (18%) adults aged 18-34 say they have been turned down for credit since March 2020, compared to just 2% of people aged 55. Nearly six in ten (57%) under 35s who have been turned down for credit since March 2020 believe it was due to a lack of information on their credit report, but 58% were not told why or how to improve their chances of being accepted.
In order to ensure lenders can offer affordable credit, responsibly, to those who need it, lenders not only need up-to-date information but more comprehensive information. Open Banking helps lenders get a much clearer, up-to-date, understanding of a borrower’s financial situation, allowing people to prove their creditworthiness and increase their chances of being accepted. As a result, under 35s are increasingly likely to be willing to securely share their bank transaction data in this way if it could help them be accepted for a loan – increasing 21% since April 2020.
Freddy Kelly, CEO and co-founder at Credit Kudos said “The Covid-19 crisis has put a huge amount of strain on people’s finances, with younger adults particularly impacted. Financial products, like credit, can help people cope with a temporary shortfall when used responsibly, but we’ve found the younger generations are also most likely to struggle to access credit, with poor information on traditional credit reports a major cause.”
“With the pandemic hitting the younger generations particularly hard, and with many younger people having a thin credit file as they haven’t borrowed much previously, many lenders have been unable to assess them using traditional credit data. But this doesn’t necessarily mean they can’t afford to repay. Open Banking allows lenders to get a true picture of someone’s financial health and make a more informed decision and, in less than a year, our data has shown a marked increase in demand among borrowers for this technology.”
Paul Harrald, Head of Curve Credit, said “When offered responsibly, credit can be a lifeline for people – helping them cope with unexpected expenses and take advantage of new opportunities. Young people more than ever need affordable forms of regulated credit to help them get by, but this can only happen if lenders have the right information to understand affordability. That’s why our soon-to-launch Curve Credit solution will use Open Banking so we can get a true picture of a borrower’s situation and support them to more easily manage their monthly outgoings. ”