We have seen significant changes in the fintech space in 2022. As UK inflation continues to rise, consumers are turning to digital technologies and banking alternatives which can offer better rates to make it easier to distribute funds and increase flexibility and financial control.
Marqeta’s recent annual State of Credit research found that credit is increasingly helping consumers cope with the cost-of-living crisis, with well over half of respondents (57%) saying they used credit cards to make ends meet over the last year. As a result, consumers surveyed by Marqeta were continuing to seek more flexible options to traditional credit, and as the world of commerce has evolved to become increasingly digital, they are exploring alternative options to traditional banks.
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Further Marqeta research into how consumers are engaging with the Lending 3.0 landscape supported this, finding Buy Now, Pay Later (BNPL) options to now be the most widely known type of non-traditional lending, familiar to 78% of survey respondents. Young people surveyed who are relatively low earners are especially seeing value in using BNPL.
With a possible recession on the horizon suggesting further strain ahead on consumer finances, non-traditional lending may increase in 2023. In a recession, many people will have less disposable income, which means they are more likely to turn to non-traditional lending options to make it through the month. This could lead to more people borrowing on smaller items and then repaying faster than standard non-traditional lending.
I expect that in 2023, convenience and flexibility will be essential for consumers and as individuals become more aware of their budget constraints, they are also more likely to look for more from their credit card provider. With consumer demand for BNPL services still growing, BNPL may become a firmer fixture in the lending landscape. This can serve to widen the access to credit and increase choices for people using credit.
Over the next twelve months, as UK households continue to battle against the rising tide of the cost-of-living crisis and a possible recession, I expect there will be increased consumer demand for and reliance on innovative credit options. Offering flexible credit options, smart budgeting options, and better insight into spending can throw struggling households a lifeline.
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By GlobalDataAmid a changing macroeconomic landscape, banks and credit card providers have an opportunity to connect more effectively with customers by offering modern and flexible card programs that meet the changing demands on consumers.
Jeff Parker, Managing Director International at Marqeta
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