The forecast of the Chancellor’s recent Autumn Statement was that there are tough times to come for many. While steps were taken to plug the nation’s budget deficit, a higher cost of living looks set to linger for the foreseeable future.

The causes of this economic downturn are too many and complex to address, but the signs are visible. Inflation is worryingly high, with rising prices and interest rate hikes fast becoming a regular occurrence. And while measures are in place to assist people with their sky-high energy bills, this winter is looking a rather frightening prospect.

Financial thought leaders have already shared their thoughts extensively on what longstanding financial institutions like legacy banks can do to serve the economy at large, while money-saving experts have advised millions on ways to better scrimp and save to lessen the impact of rising prices and higher energy bills.

But in the age of technology, what can smaller banks and fintechs do to help their clients weather the storm? Without the economic clout or government lobbying power of their larger counterparts, these SMEs, start-ups and neobanks have only one key means of making a difference – supporting their customer directly.

Chetwood Financial’s own research found that, out of 2,000 UK adults surveyed, almost a third (32%) felt that their bank wasn’t doing enough to support them during the cost-of-living crisis, indicating that many are in need of greater support.

With that in mind, we’d like to examine the role that fintechs and small banks have to play in assisting people during these hard times, and what consumers can do with the financial products and services available to them in order to insulate themselves from the worst of the current economic climate.

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Big vs. small

Before the advent of the challenger bank, virtually all people in the UK did their banking with legacy banks – the household names that appeared on the high street, televisions and on the sides of buses. While these banks would offer marginally different rates and services than one another, consumers’ options were relatively slim and common pain points like a lack of customer service and rigid, inflexible solutions were unavoidable.

In the (comparative) boom years of fintech before the pandemic, challenger banks made a name for themselves by offering more reactive and comprehensive banking experiences for their customers, leveraging open banking and Banking-as-a-Service (BaaS)-enabled solutions to compete.

While fintech growth and successful funding rounds have continued throughout the pandemic and economic downturns, it is time for the fintechs and challenger banks that have found success in recent years to turn their attention to giving back to consumers and using their tech for good.

A key element of many successful fintech propositions has been the agility that their smaller size and newer technological architectures allow. So, what can these businesses do to support their customers?

How small banks and fintechs can help

Given the number of UK consumers that use financial or banking services provided by fintechs and challenger banks, these actors are ideally positioned to have a profound impact on how consumers are using the tools at their disposal to improve their financial well-being.

Sadly, there is nothing individual consumers can do to totally insulate themselves from the cost-of-living crisis from day to day, but financial services can help protect them from unseen expenses and shocks. Having access to reliable credit products, for example, is important when dealing with sudden costs, such as broken boilers or emergency dentistry.

Though credit misuse can have a harmful impact on consumer finances, many smaller providers, particularly those that offer BaaS-enabled services, have the potential to develop targeted solutions that consumers can use for good.

Personalising products to the unique needs of different segments ultimately makes these businesses more useful to consumers during times of crisis, reducing the likelihood of people looking to unsuitable solutions to see them through a difficult period.

Using your platform for good

Fintechs and small banks can also use their visibility with their customers to provide information and educational resources about safe and responsible credit usage, leveraging their position to improve financial literacy and prevent hardship.

Just as their smaller size allows them to be more agile and manoeuvrable, the novelty of fintechs allows them to better engage with younger, more tech-literate users through the banking platforms themselves as well as through social media channels and beyond. Educating users on how to use financial products correctly is as important as making those products available to users in the first place.

Beyond the unforeseen, clever and consistent financial management is vital to making it through the cost-of-living crisis. Financial management platforms are another avenue that smaller fintechs and banks should prioritise to support their users – open banking makes it possible for these platforms to integrate with the consumer’s financial data to analyse spending habits, identify problematic patterns and suggest more efficient means of managing and saving funds.

These platforms also provide another means of providing education and improving financial literacy among banking users, which might make all the difference as people plot their way through the cost-of-living crisis and the looming recession.

Light at the end of the tunnel

With challenging economic forecasts in the near future, challenger banks and small fintechs have a responsibility to make life easier for their users. Many will suffer as they see their bills rise and their practical spending power diminish, but with the support of their financial partners, those hardships may seem more manageable.

As ever, we must remember that there is no silver bullet to restoring economic normality, but as long as we find ourselves in this situation, every one of us challengers banks and fintechs must do whatever we can to make our customers’ lives easier, and what we’ve outlined above is the best approach to doing it. All that’s left to do now is follow through.

Andrew Arwas is Director of Transformation at Chetwood Financial. A founding member of the business, Andrew initially led the delivery of Chetwood’s first loans brand – LiveLend. Andrew has held a variety of leadership roles across Strategy, Architecture and Design within Chetwood, which now come together in his latest role leading Chetwood’s Transformation agenda.

Prior to Chetwood, Andrew ran the Wealth and Asset Management practice at Capco, leading several strategic transformation initiatives across Retail Wealth Management and Private Banking. Before Capco, Andrew worked for Barclays Bank, holding leadership roles across Strategy and Change in both Retail Credit Risk and Mortgages.

Andrew Arwas is Director of Transformation at Chetwood Financial