Although news emerged last week that the UK has exited recession, the cost of living crisis continues to have a very real impact on the lives of most. Now, UK adults are increasingly turning to prepaid cards and adjusting their spending habits to avoid debt, prepaid payment firm Recharge has revealed.

A survey of 2,000 UK adults, conducted by research firm Opinium for Recharge, found that 21 per cent of Brits (equivalent to around 11.4 million) use prepaid cards, a 118 per cent increase since the cost of living crisis began.

Thirty-four per cent of users (3.9 million) said they use prepaid cards to stay in control of their finances, while 26 per cent (around three million) use them to avoid going into debt.

Günther Vogelpoel, CEO of Recharge, said: “The cost of living crisis has changed spending habits, driving Brits to seek alternative ways to ensure they are in control of their spending. Prepaid payment products are just one of the ways they are doing this. Our research highlights the importance of financial security and control. Recharge is all about putting the consumer in charge and providing them with the options to spend their way whilst continuing to meet their evolving needs.”

Recharge also revealed which demographics are most likely to turn to prepaid cards. Overall, 56 per cent of prepaid card users are aged 18 to 34.

UK adults aged 18 to 34 using prepaid cards (35 per cent) are also 75 per cent more likely to use prepaid cards for financial information protection than 35 to 54-year-olds (20 per cent). This highlights a disparity in required support between different age ranges.

Meanwhile, men appeared 53 per cent more likely to use prepaid cards compared to women (26 per cent compared to 17 per cent respectively). Londoners (61 per cent) also emerged as 144 per cent more likely to use prepaid cards than any other UK region (next is 25 per cent).

The four years since the onset of the Covid pandemic have been marked by economic turbulence, with global markets grappling with unprecedented challenges. From supply chain disruptions to shifting consumer demands, the aftermath of the pandemic has ushered in a period of uncertainty and volatility, driving significant increases in the cost of living worldwide.

As expenses continue to rise and economic stability remains elusive for many, individuals are seeking efficient and cost-effective alternatives for their financial transactions.

One notable consequence of this crisis has been the accelerated adoption of digital wallets, heralded for their practicality and accessibility. With the adoption of digital wallets poised to accelerate, industry leaders share their insights into how they offer solutions that resonate deeply with consumers navigating tight budgets.

Fostering financial inclusion

Characterised by their swiftness, accessibility and innovation, digital wallets offer practical solutions for managing expenses during economic challenges, explains Michael Wallis-Brown, vice president and global head of mobile financial services at Ericsson.

“They also play a role in democratising consumer purchasing and wealth management, particularly impactful in developing markets where they reach millions of unbanked users,” he adds.

“This fosters financial inclusion by providing diverse services like peer-to-peer payments, lending, investments, savings, and buy now, pay later options.”

Preferred choice

Echoing Wallis-Brown’s thoughts on financial inclusion, Billy Setiawan, product manager at Indonesian fintech builder Pintar Ventura Group, says digital wallets have not only proven to be a practical solution but have become the preferred choice for many.

“The allure extends beyond mere financial savings, encompassing the appeal of seamless and rapid transactions that digital wallets offer,” he says. “As consumers navigate tighter budgets, the efficiency and cost-effectiveness of digital transactions have become pivotal. Essentially, the crisis has accelerated the shift towards a cashless society, with digital wallets emerging as reliable and accessible tools for everyday financial transactions.

“In Indonesia, grappling with cost-of-living challenges has propelled digital wallet adoption to new heights. Notably, GoPay, a leading digital wallet provider, witnessed a surge in users during economic uncertainties. By offering enticing cashback incentives and promoting their seamless transactions, GoPay became the go-to solution for many navigating tightened budgets. The crisis acted as a catalyst, hastening the shift towards digital wallets, transforming them from convenient options to essential tools for everyday financial management.

“The appeal of digital wallets during the cost-of-living crisis extends beyond just financial savings. Users appreciate the added layer of security and transparency that digital transactions provide, offering peace of mind in uncertain economic times. As traditional payment methods face challenges, digital wallets have stepped in to offer a robust and reliable alternative.

“The cost-of-living crisis has underscored the importance of financial inclusion, especially in regions where access to traditional banking is limited. Digital wallets, with their accessibility and user-friendly interfaces, have become instrumental in bridging the financial gap, ensuring that a broader segment of the population can participate in the digital economy.”

Cost-effective

Drawing from his expertise in cryptocurrency, Peter Wood, chief technical officer at blockchain community Spectrum Search, has observed a notable surge in digital wallet usage.

He comments: “The cost-of-living crisis has spurred a notable surge in digital wallet adoption, observed through my extensive experience in cryptocurrency and AI.

“Rising expenses and economic uncertainty drive both consumers and businesses toward efficient, secure, and cost-effective financial tools.”

Switching loyalties

A recent study of 2,000 UK consumers by customer engagement platform SAP Emarsys suggests that the cost-of-living crisis has led 56 per cent of shoppers to switch from brands they were once loyal to in order to save money. While 19 per cent of shoppers simply feel they ‘can no longer afford to be loyal’ to brands.

Bruce Richardson, mobile strategy consultant at SAP Emarsys, comments: “Many have turned to digital wallets as a result; 50 per cent of UK shoppers actually agreed that there was ‘no need for a physical wallet now that I have a mobile wallet’.

“In order to cut through these concerns, brands need to make customers feel that they’re making specific efforts to drive down cost – and to tie that sentiment back to their brand. Through digital wallets, they’re able to their customers in tackling the cost-of-living crisis – delivering personalised offers and convenient experiences directly into that shopper’s pocket.

“The cost-of-living crisis has accelerated digital wallet adoption as consumers seek efficient and cost-effective alternatives for financial transactions. This year is pivotal for the sector as the ongoing surge in payments means it is poised to surpass credit cards in online transactions. Projections indicate a remarkable 77 per cent increase in digital wallet transactions, exceeding $16trillion by 2028.”

Payment preferences

This sentiment is underscored by Bob Legters, SVP consumer product at payments platform Paysafe, who reinforces the impact of the crisis on consumer payment preferences, noting a notable uptick in the use of digital wallets as individuals strive to manage their finances more effectively in the face of economic disruption.‌

“The cost-of-living crisis has clearly had an impact on consumer payment preferences. While our April 2023 consumer trends research found that credit and debit cards were still the most popular online payment method, local payment methods (LPMs) like digital wallets are growing in prevalence.

“In fact, 69 per cent of consumers who changed their payment habits because of the cost-of-living crisis were using digital wallets more regularly than a year prior.

“A huge part of this is consumers’ increased desire to keep a closer eye on their finances – at a time of economic disruption, it’s more important than ever to look after the pennies. Our research found that 51 per cent of consumers value the financial insights they gain from digital wallets.

“By offering these insights, digital wallets can help consumers stay on budget and make their money stretch further – a boon as discretionary spending tightens.”

Spending more time with wallets

Finally, for Simas Simanauskas, chief business officer at financial platform ConnectPay, the rise of cost-of-living has had an intriguing yet unintended consequence of driving digital wallet adoption.

“Following the rise and crash of the VC funding boom in 2021, merchants and platform operators were forced to accept that optimising costs is the most important metric, no matter if you are VC-backed or bootstrapped,” he explains.

“This meant that businesses needed to re-calibrate from focusing on UX and never-ending-beta-feature-packed products to maintaining paying customers and decreasing operational costs.

“Many businesses laid off workers. They also took notice that card payments, although very prevalent among users, were costly, too. That said, people tend to spend more with digital wallets. This means that if you can drive more spending in an environment where the cost of living keeps rising while decreasing your operational costs — then you have your golden goose.”

As the cost of living persists across the UK, an increasing number of people are turning to credit to pay their bills. However, new research suggests that access to credit is worsening – with many believing that the responsibility should fall on brands to support people.

11.5 million, or 39 per cent of financially vulnerable people, have no option but to turn to credit to afford everyday expenses, new research from AI-powered transaction analytics firm, Fuse, has found. Meanwhile, Fuse reveals that 28 per cent remain reliant on credit to pay for their mortgage or rent.

With rent prices predicted to rise yet again by another six per cent and 1.6 million people’s fixed-rate mortgage deals expiring in the next 12 months, many will see their monthly repayments rise. In light of this, UK Finance predicts that UK lending for house purchases will drop by eight per cent and that more people will accrue arrears in 2024.

Though the FCA’s Consumer Duty rules were introduced in mid-2023 to ensure improved financial outcomes for consumers, one in five (19 per cent) believe that their bank is responsible for getting them into debt.

With the situation looking dire for many, media agency UM found that seven out of ten UK adults believe brands should play a key role in helping them navigate the cost-of-living crisis, while 57 per cent also feel that brands could do more to help consumers.

Retail and finance scored highest when people were asked which sectors featured brands are most helpful when it comes to the cost of living – yet in each case, only 25 per cent believe they do enough.

Twenty-three per cent of consumers feel utility brands are doing enough to help them, but automotive and property businesses ranked lowest, with a mere 13 per cent of respondents suggesting they were offering enough support.

Doing more to protect borrowers

Fuse is now calling for lenders to offer more effective support to borrowers. Enhancing affordability measures by utilising enhanced insights and data can help lenders predict changes in affordability, probability of default, and even financial vulnerability levels before they occur.

Sho Sugihara, CEO and co-founder of Fuse, explains the significance of this as access to credit reduces: “We are living in an increasingly volatile economic climate and the financially vulnerable are in danger of being left behind as the UK’s financial gap continues to widen.

“Many people are solely reliant on credit to pay for everyday expenses and in some cases, keep a roof over their heads. However, it is hugely concerning that access to affordable credit options is plummeting at the exact moment when reliance on credit is spiking.

“The entire financial sector, not just banks, could be doing more to protect borrowers – but there needs to be better support solutions. Embracing technology and AI-led insights assists lenders during affordability testing to ensure not only more accurate credit decisions but also more personalised, effective support solutions – a vital step in creating a more inclusive financial system with improved outcomes, especially for financially vulnerable borrowers.”

Mental health concerns

The cost of living crisis’ impact on mental health is also not to be understated, explains Kim Lambert, group insights director at UM: “We’re already seeing a shift in how, when and where people shop due to the financial downturn. The mental health impact of those pressures is perhaps not as obvious, but as this study underlines it can be even more impactful.”

In response to the wider research findings, mental health charity CALM and MoneySuperMarket have launched the Money Talks report to support the campaign to help overcome the taboo of talking about financial concerns.

The research found that 86 per cent of UK adults worry about money, with more than a fifth reporting feelings of reduced self-worth (22 per cent), inadequacy (23 per cent) and hopelessness (22 per cent) over their current financial situation. However, 75 per cent said they have not spoken to anyone about their money worries. In addition, 51 per cent said they wished the stigma attached to talking about money didn’t exist.

Lis Blair, chief customer officer at MoneySuperMarket, added: “The Money Talks campaign aims to break the taboo of talking about money worries and help as many people as possible get the support they need.”

New research from GoCardless, the bank payment company, finds that 45 per cent of consumers say they donate regularly to charity today; representing only a slight drop from the 49 per cent who did so last year, despite continuing financial difficulty caused by rises in the cost of living.

The GoCardless study shows that, despite persistently high inflation and interest rates rising to their highest level in 15 years, almost two in three (63 per cent) consumers have still donated to charity within the past few months.

Encouragingly, 37 per cent of respondents plan to continue giving to charity even if they are under more financial pressure. These results show that a large proportion of UK consumers remain committed to supporting the causes they believe in.

The research, conducted by YouGov with a nationally representative sample of UK consumers, pointed towards technology as one way to help increase donations. Over half (52 per cent) of respondents say they would give to a charity again if the donation process is fast and easy, which is why platforms such as JustGiving are focused on innovation and implementing new payment solutions.

This is already a popular option for supporters, with 32 per cent of consumers reporting that they have some form of automated payment, such as a Direct Debit, set up to give to charity on a regular basis.

The research comes on the back of GoCardless’ sponsorship of the GoCardless JustGiving Awards, a partnership between the fintech and its long-time customer. The online fundraising platform, which has processed $9billion in donations to date, has seen firsthand how donors have adapted so they can continue to give, despite a tough macroeconomic environment.

‘More people choosing to give little and often’

Oliver Shaw-Latimer, senior director of payments and innovation at JustGiving, said: “As a result of the cost-of-living crisis, we’ve seen a change in the way in which people donate to charities and good causes, with more people choosing to give little and often.

“In response to that change in behaviour, there’s an exciting opportunity for new types of payment technology, such as those powered by open banking, to play a vital role in helping more funds get to charities quickly and cost-effectively.”

Pat Phelan, managing director and chief customer officer at GoCardless, also added: “Even though we’re all struggling with the rising cost of living, it’s hugely encouraging to see people continuing to give. Charities that keep on innovating, putting the donor experience first and looking for new ways to increase efficiency will stand a better chance of weathering these tough times and getting into a better position for the future.

“We’re proud to work with JustGiving and others in the charity space to transform their organisation through payments.

“One innovation we’re particularly excited about is open banking payments. They’re smooth and secure, which meets consumer demand for a fast and easy way to give. And because they move money directly from one bank account to another, it keeps costs low – so charities can retain more of the funds for the causes they support.”

Millions of people across the UK could be heading for difficulties later in life, as poor understanding and low take-up of long-term investing could put their financial security at risk; according to new research by InvestEngine, the DIY investment platform. 

As part of its new report, ‘Building a Nation of Investors‘, InvestEngine reveals that around 56 per cent of UK adults have completely stopped saving or investing amidst the cost of living crisis.

Meanwhile, 48 per cent of adults in Germany said they would rather invest their money than save – while only 33 per cent of adults in the UK took the same viewpoint. In fact, just 14 per cent of adults in the UK have a stocks and shares ISA – equivalent to 6.6 million adults.

Germans also emerged as much more likely to have knowledge of different types of investment products compared to Brits, including exchange-traded funds (ETFs), with the number of Germans making monthly contributions to ETF saving plans projected to hit 20 million by 2026.

InvestEngine also highlighted its findings which suggest a lack of financial education in the UK. Fifty-five per cent of adults surveyed in the UK, equivalent to nearly 26 million people, either disagreed or were uncertain if investing money offered better long-term returns than cash savings, despite evidence showing this to be the case.

Almost 61 per cent feel their existing education does not equip them with enough understanding of how to invest their money. Up to 68 per cent also said they had to self-teach when it came to managing their finances, with 73 per cent of middle-aged adults (those aged 35 to 54) saying they wish they’d started investing or saving at a younger age.

Calling for change

Andrew Prosser, head of investments at InvestEngine, explained: “Change is badly needed, both in terms of our culture towards personal finances and in the role that industry and government can play in facilitating that change.

“When it comes to growing your wealth through investing, the best route for many will be via ‘little and often’ investing through an ISA, utilising diversified and low-cost funds like ETFs.

“As the Autumn Statement approaches, we’re encouraged to see the UK government exploring ways to simplify the ISA landscape to make it easier for people to save and invest, but there needs to be further action to simplify the system and boost financial literacy.

“This will be crucial if we’re to ensure more people can achieve greater financial security later in life.”

Following its survey findings, InvestEngine is also calling for reforms for ISAs and financial education ahead of the Chancellor of the Exchequer, Jeremy Hunt, delivering his Autumn Statement on 22 November 2023.

InvestEngine has written to the Treasury calling for:

• A single, all-purpose ISA account for both cash savings and stocks and shares, simplifying the process of moving funds into investments and avoiding confusion over managing multiple accounts.
• Rename ISAs to ‘tax-free accounts’ to make clear the main benefits of using them to increase engagement.
• Bring pensions and investments under a single ‘investing’ banner, recreating measures like those in place for pensions to encourage employers to make investing more readily available in workplace benefits, and working with the financial industry to achieve this.
• Boost financial education from an earlier age so more people understand the benefits of long-term investing and reducing cash savings as the default for many.

UK consumers are becoming increasingly likely to use shorter-term credit options such as Buy Now, Pay Later (BNPL) during the cost of living crisis. A new Marqeta study reveals that 38 per cent of UK consumers have used BNPL to make ends meet during the last 12 months, increasing to 61 per cent amongst 26 to 34-year-olds.

Marqeta, the modern card issuing platform, has released its 2023 State of Credit report – which finds that UK consumers have been increasingly reliant on credit in the last year, with 53 per cent of respondents reporting that they are now routinely using credit cards to make ends meet.

Via its survey of 3,000 consumers globally, including 1,000 in the United Kingdom, Marqeta found that respondents believe the increased cost of living makes it harder to make minimum monthly payments on their credit cards (46 per cent). Respondents also reported accessibility issues, as 46 per cent of UK respondents who have applied for a credit card in the past 12 months had their applications denied.

As a result, consumers are turning to new credit options and are using BNPL services as a tool to help build credit and secure access to additional credit services. Forty-seven per cent of UK respondents reported that they are looking to build a credit history or improve their credit score and 61 per cent of them confirmed they were interested in using BNPL to further improve credit scores and eventually get a credit card.

Forty per cent of consumers are very interested or somewhat interested in being offered the opportunity to use BNPL services by their current credit card provider, where they would be able to pay back a purchase over time for a small fee, rather than being charged interest.

Why are consumers opting for BNPL?

For BNPL users, the lack of interest fees was a popular feature, and 47 per cent of people who had used BNPL services in the last 12 months said they chose it because of zero interest.

Other motivations behind why consumers are turning to BNPL included convenience (46 per cent), flexibility (42 per cent) and help with budgeting (45 per cent). Interestingly, 15 per cent of consumers surveyed chose to use it because they had no other access to credit.

Todd Pollak, chief revenue officer at Marqeta, said: “BNPL appeared on the market as a strong challenger to the credit card giants, and was even termed a ‘credit card killer’.

“However, during this period of economic uncertainty, consumers are becoming more savvy about the different ways to access credit and are doing so in the ways that best suit them. As a result, we are seeing both pressure for traditional credit providers to offer more flexible credit services, and UK consumers using BNPL to access and build credit, sustain a good credit score and get access to credit cards.”

UK consumers show brand loyalty

UK consumers are becoming more reliant on their favourite brands to provide credit products with 31 per cent of respondents looking for a recognisable brand they trust when choosing to apply for a new credit card, compared to 21 per cent of US respondents.

Twenty-four per cent of UK respondents own a credit card affiliated with a brand (such as British Airways or Tesco credit card), while 54 per cent consider themselves a customer of the brand or store, instead of the bank that provides the physical card, and 47 per cent consider the brand to be responsible for customer service.

The report shows that payment cards and credit cards are the gateway to additional financial products, with 25 per cent of respondents reporting that they have more than one financial product from their credit card provider and 42 per cent confirming they had a credit card first and added additional financial products over time.

Pollak concluded: “Payment cards in general, and credit cards in particular have become the new front door to the banking industry. Brands and banks can offer these to deepen their relationship with customers and increase revenue.

“Going forward, we are likely to increasingly see the integration of financial services into non-financial products, giving consumers more seamless access to credit and the embedded finance experiences they require.”

Rising interest rates, high levels of inflation and a rapidly rising cost of living have forced everyone in the UK to keep a much closer eye on their expenditures. While the struggles felt by individuals, families and SMEs have remained the most discussed and received the most headlines, charitable organisations are also feeling the crunch.

Running a charity is not free. They are privy to much of the same costs as SMEs – including rent, electricity, gas and water bills, as well as other general running costs – and, as the average consumer from the UK drastically reduces their spending, reduced generosity levels are also impacting charities.

In fact, as over 80 per cent of non-profits based in the UK expect to struggle with the increased cost of utilities for their own venues, 35 per cent believe their organisation will struggle to survive altogether.

Another factor significantly impacting charities and fundraising efforts is cash. While cash was traditionally the most popular means of donating, this trend is now dwindling. In 2019, 51 per cent of donors made a cash donation in the last year, but in 2020, this shrunk to just 38 per cent of donors; according to the CAF UK Giving Report in 2021.

Because of this, it is clearer and more important than ever that fundraising efforts evolve with the times, and embrace the digital world. Oliver Shaw-Latimer, senior director of payments and innovation at JustGiving, sat down with The Fintech Times to explain how the leading charity giving and fundraising platform is responding to difficult macroeconomic conditions.

How is the cost of living impacting the donation landscape? 

“The cost-of-living crisis is not something to underestimate,” Shaw-Latimer explained: “The third sector has struggled, but it has been supported and kept alive by those generous enough to carry on giving. Essentially, what we’ve seen is that people overall may be donating less on average, but the number of donations that we’ve seen towards charities and good causes has continued to increase.”

To ensure that donations continue to come in, even as economic pressures increase, JustGiving recognised the need to streamline the donation process and make it easier than ever for givers to return to the platform.

After realising that its previous provider was unable to match its innovative payment ideas, JustGiving began working with online payment processor GoCardless.

Shaw-Latimer explains how the partnership with GoCardless helps to reduce costs, enabling the JustGiving platform to pass on as much of the donations it receives as possible to the intended recipient: “Previously managing direct debits was a fairly manual process with lots of overheads. We’ve been able to optimise our checkout and donor experience meaning that we’ve significantly reduced the number of people who abandon the checkout and so more money is able to go to charities.

“Through GoCardless there are fewer opportunities for payments to fail and on occasion when they do, we are able to retry those payments within the same month – something that we weren’t able to do previously.

“With GoCardless, month-on-month creation of bank payments is up 18 per cent while attrition – our measure of bank payments that fail and can’t be retried – is down 10 per cent.”

The open banking effect

After switching to GoCardless, JustGiving also saw an increase in monthly mandates. Shaw-Latimer also described how increased product flexibility made this possible: “We are now able to offer direct debits on most of our products, including fundraising pages that have a specific end date or a fundraising target.

“We previously did not have the level of flexibility required to offer outside of just direct donations, but with GoCardless, we are now easily able to set up mandates with a specific end date.”

“Open banking in general for us has a number of key advantages. It’s significantly cheaper to process an open banking transaction than it is for any other (circa 70 per cent cheaper), it reduces the risk of fraudulent transactions, and we receive the cash in real time as opposed to having to wait, which is beneficial to charities.

“Furthermore, chargebacks are removed pretty much entirely which, from a merchant perspective, is a huge advantage for us.”

The future of donations

Open banking also presents further possibilities for JustGiving: “Extending beyond payment acceptance per se, in the future, our aim is to move away from onerous and manual verification processes to working directly with banks to verify people’s details,” Shaw-Latimer revealed.

“For example, when someone sets up a crowdfunding page, we ask them to send a bank statement as a means of verifying who they are, their details and where that money is going. That process can take some time and it’s open to human error. Open banking enables that crowdfunder to give consent for us to go directly to their bank in real-time.”

As JustGiving looks to extend its capabilities to maximise the number of donations it receives for the wide range of causes its platform supports, it plans to continue to seek out the providers that lead the landscape for innovation – including GoCardless.

Shaw-Latimer concludes: “We’ve built our payment platform in a way that means we can work with providers who are best in class for their specific fields, as opposed to jumping into any exclusive relationships with payment providers that restrict us, and GoCardless is the number one direct debit provider in the UK.”

Podcast World-Region-Country

Approximately 50% of crypto users are investing in digital assets to improve their everyday living standards.

According to a new survey by crypto exchange Bitget published on October 5, 46%, 44%, and 41% of respondents in South Korea, Canada, and Turkey said improving their living standards is their greatest financial goal when investing in digital assets. Meanwhile, around 36% of respondents in Malaysia and Taiwan said enhancing their family’s quality of life was more important than other aspirations. 

Around 27% of female crypto investors in the U.S. and Turkey said they invested in digital assets to fund their children’s education, compared to just 5% in South Korea and Japan. In terms of the amount invested, users from China showed the highest level of engagement, with 18% allocating sums between $50,000 and $100,000, and an additional 19% investing between $100,000 and $500,000 in crypto assets. While China has banned crypto trading, Chinese nationals can still own cryptocurrencies and circumvent the ban via VPNs. The ban also do not apply to Chinese nationals residing overseas. 

The survey was conducted between May and August, featuring over 1,500 participants from 20 countries in the E.U., China, Japan, South Korea, Turkey, as well as the U.S. and Canada.

Despite continued adoption, interest in cryptocurrencies has stagnated in certain areas of the world due to tightening regulations and falling prices. On August 4, Cointelegraph reported that crypto ownership among Canadian adults fell by three percentage points between 2021 and 2022. “Investors did not appear to shift out of Bitcoin and into other cryptoassets, as we observe decreased ownership of altcoins,” the Bank of Canada said in publishing its survey results. 

In other corners of the world, 99% of Nigerians reported awareness of digital assets in a recent survey, with 90% of respondents saying that they plan to invest in crypto within the next year. 

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