UK takes action to cut consumer borrowing
December 2021 report published by Her Majesty’s Treasury and the UK Department for Work and Pensions (DWP) outlined measures that will help strengthen financial inclusion and the financial capabilities of more people in the UK, as the country is recovering from the COVID-19 pandemic.
The report says these measures will help people move beyond “the basic need to be able to open their first bank account, to access credit, insurance and the right mortgage products at an affordable price, and when planning for retirement. “.
One of the main areas the government has tackled over the past year is consumer borrowing, which has skyrocketed since the start of the pandemic. In partnership with the Financial Conduct Authority (FCA), the government has worked to ensure that borrowers facing financial difficulties receive adequate support to manage existing mortgages and consumer credit products.
âIn October, the government launched a consultation to gather stakeholder views on how best to introduce balanced and proportionate regulation of buy now, pay later (BNPL) products, which is open until 6 January. January 2022 and will be used to inform final decisions. on the scope and form of regulation, âthe report said.
Money is always king
The report listed access to cash, bank accounts and bank accounts as the three key pillars of financial inclusion, helping people pay for goods and services and receive income, whether in the form of money. salary, pension, benefits or tax credits.
This is why the UK government worked closely with financial regulators during the pandemic “to ensure that businesses maintain access to essential banking services such as cash, while balancing the needs of customers, the safety and well-being of staff, âthe report said. .
But when it comes to payment methods, the report adds that more and more people in the UK are moving away from cash in favor of cards and other digital payment methods, especially as a result. pandemic, a trend that has “probably accelerated the long-term decline in cash use.
However, the government recognizes the continued importance of cash to the millions of people across the UK who still use it for their daily purchases, especially vulnerable or digitally excluded consumers.
âIndeed, cash remains the second most used payment method in the UK; in 2020, cash accounted for almost a fifth (17%) of the total number of payments made, âthe report says.
Because of its popularity and to “protect cash for the future”, the government is committed to passing legislation that will ensure that the country’s monetary infrastructure remains viable in the long term, in addition to previous legislative changes that have been made to support the widespread offer of no-purchase cashback by stores and other businesses.
Stimulate the growth of FinTech
The UK was the first country to develop open banking standards, which are part of the revised Payment Services Directive (PSD2) which entered into force in the UK and Europe in 2018 and has since been l ‘one of the main drivers of financial inclusion.
The program enables clients to securely share their financial data with third-party vendors and enables FinTech companies to offer them a wide range of innovative services, including automatic price comparisons and affordable lending options.
As part of its financial inclusion strategy, the UK government expects the open banking rollout process, which it started implementing in 2017, to be completed in early 2022. This is crucial because open banking has the potential to save individual consumers. to 12 billion pounds ($ 15.8 million), according to the report.
“For example, account information services can identify what individuals and households spend on household, insurance and mortgage bills, and whether there are cheaper alternatives available that can benefit individuals. and vulnerable households. “
To further support the broader FinTech sector which “has become an increasingly important part of the financial inclusion agenda”, the government has sought to create an environment in which fintech companies can scale and thrive.
Earlier this year, the government announced the introduction of a new âlarge-scaleâ visa flow in spring 2022 to attract global talent and boost the FinTech workforce.
The government has also pledged to provide Â£ 5million in seed funding for the creation of a new Center for Finance, Innovation and Technology (CFIT), which was “a key recommendation of the Kalifa journal and will aim to remove obstacles to growth and accelerate the UK fintech sector”.