If there’s a word no conversation seems to be without in current times its inflation. The stresses endured by increasing inflation are impacting all corners of the economy, from consumer goods to employment, and the results in the fintech industry are emphasizing all the ramifications of these drastic changes. Joanna England of Fintech Magazine highlights the impact of inflationary pressure on fintech trends and the fintech community:
“Neil Kadagathur, Co-Founder and CEO of the UK fintech lender Credit Spring, believes the cost of living crisis has led to increased scrutiny on financial services firms from the regulator to ensure that consumers are treated fairly and protected.”
The changes in the industry that Kadagathur further describes are actually a positive in the long-run to ensuring that consumers are well informed of the actions taken by companies they trust in financial services. England adds more commentary from Kadagathur:
“He says an increased focus on the impact to customers should be welcomed by the industry. ‘The financial services sector has a duty to protect customers, especially in the current financial landscape. Lenders, for example, have long had a poor reputation amongst borrowers – four in ten (43%) people believe lenders encourage them to take out more money than they can afford and fewer than one in five (17%) see lenders as responsible businesses that care about their financial wellbeing.’ A result of this is, as he points out, that more responsible and ethical business models are emerging across the industry to meet the demands of borrowers and ensure they are protected.”
The trust in fintech vendors is paramount for the industry to continue to accelerate through the downturn and build long term and meaningful relationships with their clients. My colleague Brian Riley provided research recently to warn of the pending impacts of inflation on consumer budgeting. He points out that personal savings, currently at 5.4% of disposable income is at risk as personal expenses rise and consumers have no additional income alternatives to utilize when accounting for necessary spending. While we believe that in the short term, credit card spending will increase, there is opportunity for a range of fintech firms to create better programming to diversify the means in which individuals maintain their budgets and work their way through the personal implications of the inflationary economy.
As a preview of upcoming research I have in the prepaid space, opportunity exists for both current and new fintech players to utilize prepaid instruments as an advantageous tool in shaping consumer budgets, working within family units and affecting change in the marketplace that can withstand the demands that inflation is putting on consumers.
Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Mercator Advisory Group.