Offering consumers tailored credit offers that suit their individual needs and providing them with more choice is now a “major area of focus” for consumer credit lenders, Freedom Finance has stated.

This comes as today’s increase to the energy price cap will see the typical energy bill in the UK rise to £3,549, and as Freedom Finance also reports signs of increased borrowing in the consumer credit market.

Inflation in the UK currently stands at 10.1%, according to latest figures from the Office for National Statistics. Estimates suggest that the Consumer Prices Index (CPI) from the ONS would last have been higher than its current level in 1982.

When the Bank of England (BoE) raised its base rate to 1.75% earlier this month, its sixth successive increase to interest rates, the Bank also stated that CPI inflation is expected rise to just over 13% in the fourth quarter this year. The BoE’s forecasts indicate that inflation could remain at “very elevated levels” throughout much of 2023, and is not expected to fall back to the Bank’s 2% target for another two years.

Speaking exclusively to MoneyAge, chief revenue officer at Freedom Finance, Michael Davidson, said that amid this economic uncertainty, demand for credit is now “starting to grow”. He expects to see this demand rise further over the next 12 months, as consumers look to navigate a challenging period for their personal finances.

“As well as looking to the consumer credit market, people should be taking some essential steps first which may reduce the need to use loan products,” Davidson commented.

“This might include ensuring that they are budgeting as well as they conceivably can in advance, checking for any unclaimed benefits they are eligible for and reducing, where possible, any outgoings.

“The lending industry will play a vital and positive role in helping to meet the growing demand for credit and give people access to a range of regulated and affordable borrowing products. This will help people manage their money through soaring energy bills and income-sapping inflation, and come out on the other side on a secure financial footing.”

Davidson also suggested there has been a response to “changing consumer habits” in the past few years, a trend that was accelerated by COVID and shifted the financial services sector “more or less entirely online”.

He highlighted “embedded financial services” as one of the fastest-growing developments in the consumer credit market, and described it as an area of the market that can adapt to rapidly changing financial needs among borrowers experiencing significant changes to their living costs.

“Embedded finance digitally integrates financial products – such as loans or insurance – with non-financial organisations like shops or car dealerships,” Davidson said.

“This innovation in the market shows how the industry is adapting to meet a fundamental demand from customers for more personalised services. These embedded financial services can be delivered digitally or on the high street, give customers access to a wider range of products and improve flexibility, simplicity, speed and ease of use through their journey.

“Offering consumers more choice as well as tailored credit offers that suit their individual needs and circumstances is a major area of focus for lenders.

“Lenders are recognising that if they cannot offer a customer a specific product or service, partner-led services that are able to meet these demands are crucial to the financial wellbeing of the customer.

“Partnerships with digital marketplaces that enable a wider range of customers to access a deeper variety of products and providers are also helping more people access the affordable credit they may need in the current economic environment.”

With Citi Group’s recent forecast that inflation in the UK could even reach as high as 18% in 2023, a figure likely to drag many more households into economic turmoil, Davidson also stressed the importance of borrowers having access to “all the tools that the lending industry has at its disposal”, to make the consumer credit market work for them.

“This involves shopping around to find the best rates, and ensuring they are utilising the latest technologies so that they are only offered deals they are eligible for,” he added. “This means they don’t run the risk of declined applications which can lead to frustration and credit score damage.

“Comparing products using soft search technology is also important as it means when people are hunting around for credit they won’t damage their credit score which can often be the case with providers that still use hard searches.

“This soft-search technology is a fantastic way of opening up access to the credit market.”

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