Elifinty and the financial landscape – Looking back at 2022 and towards 2023


Elifinty and the financial landscape – Looking back at 2022 and towards 2023

As the year draws to a close, we’ve been reflecting the months passed. For our relatively young business, we’ve achieved a lot. From setting up a first of its kind financial resilience hub in Lambeth and Southwark, to building a major funding round, to our team more than tripling in size, we are setting up well to deliver our mission.

Our mission being to provide a digital solution for more socially conscious debt management practices, providing businesses with the technology to deliver better outcomes and prioritise customer experience.

And we think our mission is coming at the most crucial time. As we look toward 2023, the need for a connected debt management solution like TrustConnect has never been more pressing.

The roundup

This year, some of the biggest things we’ve seen in terms of finance and the economy include:

  • Inflation in the UK rising to 11.1% – and it’s expected that we will stay with this for the next 2 years
  • We have approached the longest recession in living history
  • The Bank of England (BoE) increasing their interest rates to 3%

To perhaps most people, this drastic destabilisation of the economy seems to have almost come out of nowhere. But, to those in the industry, it’s known that this has been building up for some years.

While the numbers are concerning, banks are arguably still in a false sense of security because the issue hasn’t fully taken effect for them yet. Next year, however, the cracks will start to show and the problems we are beginning to see are going to materialise quite obviously.

The energy crisis

There’s a lot of incremental factors that have led up to the 2022 energy crisis. Since 2021, if not earlier, energy prices have been rising. This is because of maintenance work that was delayed by the pandemic, decisions made by oil and gas companies and exporting countries that have intended to reduce investments, and even extreme weather conditions across the world.

However, the most obvious event that exacerbated the situation is the invasion of Ukraine by Russia. With Russia restricting its export pipelines and certain countries in the West phasing out Russian exports, this was the final straw for a full-blown energy crisis.

Importantly, this energy crisis has highlighted a number of problems within different sectors. It’s become evident that there’s a lack of transparency, customer centricity, and data sharing within the energy industry. What’s more, the solutions on the market don’t go far enough in terms of solving the underlying issues. These problems are centred around the consumer; the household budget imbalance combined with the cost-of-living crisis and rising debts.

And, this is only just the beginning.

What does this mean for 2023, and the years to come?

We have a few predictions for next year surrounding the debt management landscape and the general UK economy.

  • Next year, it’s very likely that the UK are going to have a housing crisis, which will be triggered by a nation-wide recession.
  • The BoE will need to raise rates to curb inflation. The only way inflation will go away (the models are showing) is by the BoE raising rates to 6% or more.
  • This bank rate increase will mean catastrophic budget failures for households – meaning many households are going to struggle immensely.
  • Banks may begin to repossess more houses, which will then be sold to vulture funds, which will contribute to more wealth concentration.
  • Banks and energy companies will start to see the impact on their portfolios.

The majority of individuals and businesses are going to be affected by these problems next year. While currently some people may be unaffected, or know just one or two people affected, in 2023 it’s likely you will know more people struggling financially and that you yourself may begin to struggle too. There are 12 million people just on the cusp of financial difficulty, 6 million of which are in deep problems already.

There’s going to be a domino-effect of issues

An economy works on consumption, exports, and production. In the UK, production is already limited. Consumption will be impacted because consumers won’t be able to afford luxuries as they used to, with some barely even able to afford the essentials. Our exports are also limited, with the UK predominantly ‘exporting’ services.

However, in a time of economic crises, services will be sacrificed over products, as products like food and clothing take priority over service-based goods, and this will then have an impact on jobs.

Reserves and capital are already being increased, and costs will continue to rise. Firms will have to start letting staff go to control costs, but this will mean certain roles won’t be fulfilled. In terms of problem debt, without having the staff, firms will be less equipped, meaning they’ll have significant challenges with portfolios and then resort to selling this debt off – at a loss.

Elifinty’s advice for firms for 2023

It’s a worrying landscape, but we have some advice and guidance for firms to help you better navigate the problems ahead.

Focus on the underlying issues

Whenever you are considering how an investment will perform, you think about the underlying performance of the asset. In this instance, the asset is people and households. The performance of households needs to improve to improve the performance of portfolios.

Firms need to work to help underlying budgets to become better. This is done by supporting your assets – your people. People need the right support – support that considers the complexity of their challenges, and that isn’t just preoccupied with the debt itself.

Embarking on a culture change

Firms will benefit from making an entire behavioural change to how they approach their processes. Retouching on the above, firms need to not look at their portfolio assets as an isolated entity but think about the humans behind them.

A lot of companies are stuck in the old manner of dealing with their challenges. This is the approach of setting up a department, putting some resources into it and hoping it fixes itself. However, this just isn’t effective.

These departments often don’t have the strategic support to deliver the way that they should. These under-nurtured departments then can’t provide meaningful solutions for customers – if they don’t have the tools themselves, such as proper training and skilful know-how, how can they be expected to support customers in the right way?

Plan ahead

Organisations are going to have to make some tough decisions over the next year, and in the years to come.

If you effectively plan, keeping in mind all the challenges ahead, you can be better placed without having to take the more difficult decisions later on. Now is the time for you as an energy company, as a financial firm, as a housing association, to invest in the future. In this case, this means investing in something that can help you change the path or course of your business, for the better.

Evaluate and improve your processes

If it hasn’t been done already, firms need to prioritise improving their processes. This means making them more efficient, more data-driven, and automated where possible. Invest in all of these.

It’s important to consider the network effect. Your assets are people. They’re linked to lots of other things – to other creditors, institutions, and so on. Their performance with one affects their performance with another, so this interdependent network needs to be considered in your processes going forwards.

Looking ahead – Thoughtful intervention for 2023

Many in society will be unable to pay their bills, their mortgages, their rent and more next year. Firms may be forced to take drastic action, but thoughtful intervention and thoughtful support is necessary.

There’s a lot to be concerned about. However, with collective action we can, as a society, work through these challenges. We need to see the interdependency between every ‘asset’, every transaction, every process, and no longer see things as ‘not my problem’.

Firms can no longer afford to send people to debt advice and hope everything will work out. Your organisation needs overarching transparency and ownership of each customer, all the way through to resolution. The approach needs to be people-centric and put the humanity back into processes.

We are hopeful with what our TrustConnect platform is going to achieve. With everything happening in society right now, we can see that our solution couldn’t have come at a more appropriate time. A one-of-a-kind socially conscious debt management platform, TrustConnect is working to solve some of the biggest challenges of our generation.

Want to make sure your firm is prepared for 2023? Get in touch to find out more about our TrustConnect platform and how we can help you.

Hoss Atri

Written by Hoss Atri

Chief Revenue Officer & Head of Partnerships

Accomplished executive with a solid track record spanning more than 25 years in Fintech including sales management in banking and international payments.

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