The UK fintech sector is one of the fastest-growing industries, contributing £44 billion to the economy in 2022. Innovations in this sector hold considerable promise to help those struggling with the cost-of-living crisis – having the potential to democratise access to financial services.
In relation to this, The Payments Association has released a new report to examine how fintech innovation can help mitigate the impacts of the current economic hardship and build a more inclusive and resilient financial system in the UK.
The Payments Association seeks to showcase innovation and collaboration across the payments industry. The latest report explores the intersection between the complex socio-economic issues of the cost-of-living crisis and poverty premium in the UK.
The report is titled ‘Navigating the rising cost-of-living: Payments innovation as a game-changer’. At its basis is an exploration for seeking a more inclusive and resilient financial system in the UK.
Within the UK, economic hardships are becoming more pronounced for many households, particularly those at the lower end of the income scale. With inflation above 8 percent and real wages continuing to fall, this economic squeeze has resulted in the cost of goods and services outpacing wage growth for many of the population, particularly those on lower incomes.
Can fintech assist? In some ways there is the potential to do so, according to the report. Fintech solutions can provide more tailored options for payments, saving, borrowing, and managing money, bypassing the traditional banking system. Standard banking is often more expensive and less accessible to those on low incomes.
The examples of how fintech can support people has been drawn from interviews with payments companies, third-sector bodies and local councils, the report identifies those communities that require more support during the cost-of-living crisis, including those on the lowest incomes, as well as the market solutions already available in supporting them.
The report also charts some things that need to be reformed. These include:
- Open technical standards for the government’s social payment infrastructure.
- The development of a rulebook regarding how government payments operate.
- Structured funding for social sector-led payment innovation, while also giving a launchpad for their ideas and insights into the financial lives and challenges faced by underserved groups like the elderly and those out of work or in debt.
- Reconnecting housing associations (who provide community housing) with local financial support services.
In light of the report and the proposed reforms, Neil Harris, who is the Chair of the charity The Inclusion Foundation states: “Industry and policymakers must work together to open up and improve access to digital financial services and take active steps to involve those people most affected by financial exclusion and the ongoing cost-of-living crisis. With this report, we hope to not only move the discussion forward but catalyse much needed action.”
