Giles Desforges
The need for consumers to better manage and protect their financial profile has become increasingly important over recent years, with pressure to act coming from two sides.
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On the one hand, constricted lending and deteriorating credit scores, on the other an increased risk of identity theft and fraud. The tightening of consumer lending post credit crunch has meant that institutions have become more selective with their lending. With consumers needing a higher credit score entry point to access finance, along with the deterioration of the average credit score in a number of mature economies, many consumers have been left struggling to manage their finances in a challenging economic situation. As a result we are seeing an increasing consumer need and the opportunity for financial institutions to do more to help consumers better manage and control their credit profile, and understand the implications of any changes to it.
The credit management needs of consumers will continue to be driven by the challenging macro-economic environment.
Western economies have been through a period of near unprecedented change and this looks set to continue for the foreseeable future. With customers required to be more circumspect with their finances, we are seeing a change in consumer attitude with a move toward a more proactive approach to credit management.
Recent research conducted in the UK by the pollsters YouGov found that consumers are increasingly aware of credit reports and more comfortable with their functionality. While some usage is fuelled by a curiosity factor, research shows that credit management and identity theft detection and prevention are increasingly given as reasons for people accessing their report. For example, many consumers are uncertain about the effect ‘shopping around’ for information about their credit report can have, as well as concerns about whether checking their report might negatively impact their score. In addition, there is confusion about how the information in a credit report can affect the credit score and what steps can be taken to improve it.
As a result, there is an underlying demand for trusted experts within the market to provide a service that can educate and simplify consumer management of their credit profile on a longer term basis, helping customers incorporate planning around their financial position and putting sustainable actions in place to manage and build a positive credit profile. To add to consumer challenges, the difficulty in the current market does not end here. Not only are many consumers struggling with their financial profile, but they are also faced with the increasing risk of identity theft.
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By GlobalDataResearch group Fellowes believe that Britons are more at risk of falling victim to identity fraud than any other country in Europe. This is supported by evidence of identity fraud being one of the fastest growing financial crimes in the UK. In the first quarter of 2012 alone, fraudsters exchanged 12 million pieces of personal information online; a staggering 300% increase since 2010. (CIFAS July 2012).
With more and more of our lives online, this figure is only set to rise. Our research shows that the increase in online payments, coupled with personal information being shared more widely than ever before, means that identity theft is now a major concern for consumers.Unfortunately, many consumers are still not fully aware of the damage that can be done to their financial profile in the event of identity fraud. Traditional financial products have tended to focus on either helping to protect a customer’s identity or around one off access to their credit report and score.
This points to an evolving gap in the market for a simplified and all-encompassing product that can work seamlessly to put consumers in control of their wider financial footprint whilst simultaneously shielding them from any potential threats to it.
It is crucial that financial institutions evolve with the changing needs of consumers, providing customers with effective solutions. Institutions that do will benefit from improved and more rewarding relationships with customers in an era where loyalty is less easily taken for granted.
Giles Desforges is the MD of Affinion International. Affinion provides a wide range of protection and lifestyle products that offer value to consumers whilst building additional revenue streams and increased customer-to-brand loyalty and engagement for its partners.
