The overwhelming majority of UK consumers and businesses have turned to financial tools and applications to cope with the cost-of-living crisis, according to new research from Yapily, the European open banking infrastructure platform.
Yapily’s Open Banking and Financial Wellbeing report comes as the current economic climate continues to pinch the pockets of consumers and businesses across the UK. Inflation rates are hovering at a 40-year high with the cost of living now outpacing the average income for many households. As a result, nearly all consumers (95 per cent) are somewhat or very concerned about the cost of living crisis. Businesses, too, are feeling the impact, with nearly half (48 per cent) reporting they’ve had to raise prices to cope.
Brits using financial products to weather economic turmoil
The research reveals that almost nine in 10 (88 per cent) consumers have turned to financial products and services in the last year to help them better manage their finances. What’s more, many consumers are using these services for the first time: 63 per cent of consumers surveyed using budgeting apps are doing so for the first time in the last 12 months. This is the same for bill management (68 per cent) and credit score tracking (68 per cent).
What’s more, 66 per cent of consumers have used financial products and services in the last 12 months to help supplement their income, with 36 per cent using credit cards for the first time during this period, followed by buy now pay later (27 per cent) and overdrafts (18 per cent).
Businesses are feeling the impact and looking for support, too. As a direct result of the cost of living crisis, the vast majority of businesses (94 per cent) have changed their business processes. The most common coping strategies are to cut expenses (48 per cent), raise prices (45 per cent), or utilise new technologies (28 per cent). Three in four have used financial products or services to manage cash flow over the last year, turning to business cards (33 per cent), overdrafts (31 per cent) and loans (27 per cent) to help.
Yet awareness of open banking remains low
Many of these tools are powered by open banking. With the customer’s consent, providers like Yapily can securely access financial information held by banks, enabling businesses to build smarter, more personalised and convenient solutions for their customers.
However, despite four in five (80 per cent) consumers saying they feel confident they understand the money management tools available to them, the majority (52 per cent) of those surveyed have never heard of open banking.
Businesses are more aware of the benefits of open banking than consumers. One third (33 per cent) have heard of it and are considering using open banking-enabled products and services, whilst nearly a fifth (19 per cent) have heard of open banking but don’t understand how it could benefit them.
Open banking-enabled tools can alleviate inflationary pinch
For consumers, open banking means greater access to better financial products and services, from budgeting apps that help people to save, manage, and move their money more efficiently, to lenders that carry out accurate affordability assessments based on income and expenditure rather than legacy scoring methods.
To those businesses that have heard of open banking, the benefits are clear: reduced admin times (31 per cent); a cheaper payment method (29 per cent); and improved cash flow management (28 per cent) being the top three selected.
Stefano Vaccino, CEO and founder of Yapily, said: “Our research proves that businesses and consumers are seeking new ways to ease the burden of the cost of living crisis. At the same time, open banking is helping people access better and fairer financial services when they need it most.
“But until it is more widely understood and implemented, open banking’s power to cushion the blow of this inflationary pinch will remain out of reach for the masses. If open finance is the inevitable direction of travel, then the cost of living crisis is the unexpected catalyst that will — and must — get us there sooner.”
Commenting on the report, John Penrose MP said: “Yapily’s research shows how open banking is already helping consumers and businesses alike, and underlines the huge opportunities of broadening it to cover other industries too. An open economy implementation entity would free up every sector of our economy. The effect would be revolutionary, and I hope the government will use the Data Bill to make it happen.”
Emma – helping consumers budget better
Using Yapily and open banking, Emma can consolidate an individual’s bank account data to offer a complete view of all of their ingoings and outgoings in one place – no matter how many accounts they might have with different banks. It can also analyse this data to provide insights into spending behaviours, patterns, and predictions.
In this way, Emma is enabling people to save money by cutting back on unwanted subscriptions, transferring money into savings or investment accounts, and avoiding bank charges for things like overdrafts.
“My bank simply stores my money – they have no interest in helping to improve my financial wellbeing. With the dramatic rise in the cost of living, Emma is a great way for people to quickly reduce their outgoings. Most customers see savings in the first two to three months as they learn new habits and access helpful information on how to manage their money,” said Edoardo Moreni, co-founder and CEO of Emma.
Yonder – giving people with no credit history access to affordable finance
Research by Experian shows that over five million people in the UK have little to no credit history. In particular, many expats and young people are being exploited or excluded as a result of legacy credit scoring methods.
Using open banking, Yapily is enabling Yonder to carry out a more accurate, complete, and fair way to assess creditworthiness.
With the consumer’s consent, Yonder can fetch specific bank account information, analysing factors like income and expenses, to create a holistic view of their financial position. Consumers also benefit from using open banking payments when paying off their credit balance; a quicker, easier, and more secure way to transfer money directly from one account to the other.
Together, this is helping consumers to build a healthy credit record from scratch, participate in reward programmes, and access more competitive lending services in the future.
“Unfair credit scoring methods, legacy app experiences, and vague pricing techniques are a thing of the past. With open banking, we’re bringing back fairness and equality to the credit industry. Yapily’s technology and open banking expertise are helping to make that vision a reality,” said Tim Chong, co-founder CEO of Yonder.
Salad Money — enabling key workers to check their benefit entitlement for free
Salad Money is a lifeline for key workers that have been denied access to funds due to limited credit history or are unaware of what financial options are available to them.
With open banking, Yapily enables Salad Money to retrieve a customer’s transaction and spend data to complete an accurate affordability assessment. Salad Money then uses this information to help NHS and public sector workers access more affordable credit options and understand what benefits they could be entitled to. This helps them to identify tangible changes to their income that are immediately accessible.
“While politicians often praise the selfless and vital contribution key workers make to society, they are often among those underserved by the financial services industry. Additionally, in the UK key workers from abroad are often entitled to benefits but nobody tells them what they could claim.
“That is a huge help to these vital key workers that so many of us rely on. By utilising Yapily’s open banking infrastructure, we’ve been able to gain access to accurate, real-time account data which has been instrumental in improving the financial wellbeing of NHS and public sector workers,” commented Tim Rooney, CEO, Salad Money
Juni – boosting SME cash flow
Juni enables eCommerce businesses to get a real-time overview of their finances, maximise cash flow, and receive better credit decisions – all critical to SMEs as the cost of living crisis bites harder.
With the customer’s consent, Yapily enables Juni to instantly fetch and aggregate financial information across multiple bank accounts. Juni then uses this information to make better credit decisions and help SMEs manage their working capital. It also allows Juni customers to make instant top-ups via open banking payments, helping to manage cash flow with ease and create a streamlined user experience every time.
“SMEs simply don’t have the time to waste on low-value and burdensome administrative tasks. By providing real-time data insights with open banking and Yapily, we are enabling SMEs to make faster, more impactful decisions that will be especially valuable during these difficult times,” said Samir El-Sabini, co-founder and CEO of Juni.
Crezco – making payments quicker, cheaper, and easier for businesses
Amid the cost of living crisis, increasing card fees and the threat of late payments mean SMEs are seeking ways to streamline costs now more than ever.
With Yapily and open banking, Crezco can offer businesses instant and frictionless account-to-account payments that eliminate legacy costs and manual processes, saving SMEs both valuable time and money. Crezco customers can then collect recurring payments, automate reconciliation, and integrate with accounting software to enhance cash flow management.
“Open banking is the technological revolution which allows us to build more convenient and cost-effective products to improve the financial wellbeing of our SME customers. Yapily provides Crezco with wide and robust connectivity to banks across the UK and EU, helping us to provide a cost-efficient and instant account-to-account payment solution to SMEs at scale,” commented Ralph Rogge, co-founder and CEO, Crezco.