Younger borrowers facing barriers to access credit

5th March 2024

As consumers continue to navigate cost-of-living pressures, new research shows that younger age groups face significant barriers when it comes to accessing credit according to a survey of 1,000 UK borrowers by Tink.

The research found that over three quarters (78%) of 18-34 year olds have had a loan application rejected. When asked why they’d been disqualified from a loan, 12% cited thin credit history (e.g. not having enough credit history to qualify) and 11% noted the inability to prove their financial history.
The insights also show that younger age groups abandoning arduous applications, suggesting they have zero tolerance for friction-filled processes and may not be capitalising on the financial services available to them. 

Nnearly a quarter (22%) of 18-34 year olds have abandoned a loan application and used a different lender because the process was too cumbersome. What’s more, when applying for a loan, 20% of respondents said they had the correct documents, but abandoned the process because they needed to submit them manually (e.g. had to print them off and post them).

The survey of 200 UK lenders supports these findings, with research showing that 36% of lenders cite manual income verification as the point when they see the most drop off in the loan application process. 

Similarly, the research suggests that cumbersome manual processes can be costly and time consuming for lenders. 32% of lenders surveyed cite manual income verification as the most time consuming step in their own risk decisioning process, and a quarter (25%) say document validation (capturing application information and analysing its authenticity) is the highest cost they face. 

As a solution to overcome these barriers, younger age groups cite a willingness to give lenders permission to view transaction data from their bank accounts in return for smoother application processes and a better chance of securing a loan. 

For example, encouragingly 40% of 18-34 year olds surveyed would enable lenders to digitally view transaction data from bank accounts to improve the application process (e.g. remove the need to manually submit documents on income and expenditure), while over half (57%) would like the option of having loans tailored to their financial situation (e.g. repayment plans which adapt to their monthly incomings and outgoings).

The research highlights that lenders recognise that improving the loan application process makes sound business sense. More than three quarters (78%) of lenders surveyed agree it’s important to reduce friction in the lending application to give them a competitive advantage, while 77% say it’s crucial to improve risk decisioning models to give a more accurate view of people’s finances.

Jack Spiers, Banking & Lending Director at Tink said “Our research highlights a clear access issue amongst younger generations trying to borrow. Not only are a significant amount wrestling with cumbersome application processes, they’re also being rejected for loans based on factors that suggest blinkered financial assessments.

“It is important lenders are harnessing data-driven risk decisioning solutions to offer fair, accurate affordability checks, while also removing the friction associated with manual application submissions. And it’s not just benefiting the end user. Adopting these models can help lenders too – boosting customer acquisition through improved success rates, while reducing operational costs.”