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article imageHello 2021 and to the looming credit crisis Special

By Tim Sandle     Dec 31, 2020 in Business
2020 was a tough year, and 2021 will also bring with it various challenges. One of the challenges will be in terms of consumer finances, especially in relation to securing credit. A finance expert explains the opportunities and threats.
Due to the coronavirus pandemic and the economic impact, many people have had to resort to taking out loans or finding ways to minimize debt repayments. This has led to consumers becoming especially concerned about how the current economic conditions might affect their financial situation. This not only includes their levels of debts as they stand now, but also their longer-term credit score.
There are also concerns with ‘payment holidays’, where consumers are allowed a period of non-payments. According to consumer rights group Which?, this may help people to avoid real-time problems but it can also lead to future concerns with credit reference agencies and lenders and ultimately the credit scores of individuals.
To look at the matter further, Digital Journal caught up with Steve Smith, CEO of fintech Finicity. Smith has been looking into the looming credit crisis, consumer concern about finances and credit due to the current economic crisis and how banks and lenders should respond
Smith notes that as the world looks to 2021 with hopes for an economic recovery, then "strong consumer credit will be one of the last steps in this recovery. While consumer confidence remains stable and more government aid will provide a temporary boost, credit scores lag. I expect that we’ll see credit scores decline later in 2021."
Considering recent Finicity data, Smith assesses a survey conducted in 2020 that "anticipates this credit crisis: nearly two-thirds of consumers (65 percent) are concerned their credit score will go down in the next 6 months because of the pandemic, and 70 percent think the need for a better credit review process is more urgent because of this economic downturn."
Based on these findings, Smith recommends that: "Banks and financial institutions will need to look past lagging indicators such as traditional credit scores, and I believe we’ll see an expansion of platforms like open banking for a more complete, real-time view into individual and organizational financial health."
More about Credit, Credit score, Debt
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