Reading the news, you might think that the UK’s cost of living crisis is no longer a crisis at all.
Media attention has wavered, and so have internet searches. In fact, Google Trends data shows an almost 80% decline in searches for “cost of living” from late September 2022 to the same time period in 2023.
You may even believe that the UK’s financial circumstances are improving, with inflation reaching its lowest rate for two years and the average pay increasing for employees in Great Britain.
But when we pull back the layers, we can see nuance that the mainstream narrative hasn’t uncovered. Like the fact that food inflation may have dropped, but more than 40% of adults in Great Britain reported spending more than usual on their typical food shop in the two weeks prior, when asked in early November.
The UK’s cost of living is still a crisis. We need to keep talking about it – but more than this, we need to do something about it.
What can we learn from the cost of living crisis so far?
Looking at the positives, many consumers have been able to access support throughout the cost of living crisis, like through the Energy Bills Support Scheme, for example. But unfortunately, while these schemes lend a helping hand, they’re still a work in progress.
Rigorous eligibility criteria mean that financial support isn’t universally available, and even when consumers are eligible for grants and reliefs, they first need to know they’re there. Not knowing which support schemes are available is a particular risk for digitally excluded consumers, who may also struggle with the application process.
The past few years have also reiterated that when society faces a crisis, it’s the people who are already the most vulnerable that struggle the most. This “poverty premium” can manifest in many ways. For some, it may be not getting approval for a variable rate energy tariff. For others, it might mean relying on buy now pay later models for essential purchases (and facing extortionate late payment penalties).
However the poverty premium manifests, the population of vulnerable people at risk of facing it is on the rise. According to the FCA’s Financial Lives report, the number of people in “financial difficulty” increased by almost 1.5 million between mid-2022 and early 2023.
It’s clear that the cost of living crisis is still having very tangible real-world impacts. What can we do about it?
What can we do about the cost of living crisis?
There’s no one-size-fits-all approach to “fixing” the cost of living crisis. It’s a complicated issue, one that has been perpetuated by many smaller crises and can only be tackled by long-lasting systemic change. And this change needs to come from the top down.
Ultimately, the UK needs to be able to kickstart its economic engine again, but sustainably. This means being able to generate non-problematic debt, without vulnerable people facing more risk in today’s recessionary environment. The Consumer Duty is a promising start, regulating how firms connect consumers to financial products and services, but there’s more to be done.
When it comes to tackling the cost of living crisis and ensuring long-term financial resilience, there are three systemic changes that we believe are crucial:
- Create access to capital for everyone, such as by having a universal income.
- Ensure uncompromising access to basic human rights, such as food and fuel.
- Update how we measure financial success, taking into consideration both mental and physical wellbeing too.
And while these are ideological, requiring almost total intervention from governments, we can break them down into granular steps that can be implemented almost immediately.
How can we support at-risk consumers, right now?
Institutions shouldn’t wait for systemic change to just happen.
Here are three steps that businesses can action right now to support financially vulnerable consumers throughout the cost of living crisis:
Connect customers to support as early as possible
By connecting people to the most appropriate support for them, as early as possible, businesses can prevent the build-up of problem debt. Instead of assuming that at-risk individuals know exactly what support they’re eligible for, businesses should focus on putting them on the right pathway proactively.
With our digital debt support platform, that might be by sending them food vouchers, because they’ve indicated that not being able to afford food is their most pressing concern. It might also be by adjusting their payment plans, because their financial circumstances have changed unexpectedly.
The key is for businesses to have full visibility of every consumer, so that they can identify changes in their circumstances and respond in the most impactful way (before the problem escalates).
Consider a more holistic approach to financial health
Financial health is just one element that affects an individual’s overall wellbeing. Unfortunately, many financially vulnerable people also experience mental health concerns, such as anxiety over their late payments.
Businesses should look to support their consumers with a more holistic approach, particularly while they’re coping with an increased cost of living. Instead of focusing on financial health alone, firms should make it easier for consumers to share if they’re struggling and access the appropriate support.
We believe this should go beyond signposting to mental health services. That’s why, with the Elifinty platform, businesses can connect consumers to specialist advisors directly through digital messaging or in-person advice.
Invest in more flexible debt support technology
Businesses should invest in technology that allows them to maintain much-needed visibility over their consumers, identify when they need help, connect them to the most appropriate pathway, and support them holistically.
At Elifinty, we’re committed to developing flexible debt support technology that allows creditors to create truly independent pathways. Our digital platform connects individuals, creditors, and specialist debt advisors, creating a direct line of communication between the key players in debt recovery.
With easy data sharing, self-service financial education tools, digital communication modules, and an AI solution engine, our platform helps to facilitate more efficient debt support – alongside sustainable behavioural change.
Navigate the cost of living crisis with Elifinty
We’re here to help energy companies, financial services firms, and housing associations deliver targeted and holistic support to their consumers, while benefitting from speedier collections and enhanced reputations.
Not just for the cost of living crisis – but for a brighter financial future.
If you’d like to learn more about the Elifinty platform and its three connected hubs – EliEngage for creditors, EliConnect for debt advisors, and Eli for individuals – please don’t hesitate to get in touch.