Money may make the world go around, but for many British people, it’s making their heads spin. In fact, according to research by price comparison website MoneySuperMarket, a fifth of UK adults admit that their money worries have impacted on their health. It’s the latest generation feeling the strain, with 58% of 18-34-year-olds complaining that they are concerned by the state of their finances.
These findings chime with our own research, which reveals that 44% of adults aged between 18 and 24 are struggling to manage their money. The same proportion told us that going into debt is one of the biggest causes of stress. Most disturbingly, nearly a quarter (24%) of this demographic have already found themselves in debt.
This is a trend that could well continue. Earlier this year the Bank of England, although more positive on the country’s overall economic outlook, warned that rising inflation could have challenging implications for consumers. Moreover, a persistently weak growth in the level of wages means that the next year could see Britons being forced to tighten their belts yet again. And with UK debt already at record levels – the average household currently owes £12,887 before mortgages are considered, according to trade union centre TUC – the situation is becoming somewhat alarming.
Help may be at hand, as a new EU directive seeks to address this issue by offering consumers a way to streamline financial management. Known as the second Payment Services Directive (or PSD2 for short), the regulation is set to run across the entire EU and will allow financial data to be shared across multiple digital financial platforms, meaning that consumers will be able to use a single digital platform to manage their bank accounts, bills and debts.
Cutting levels of debt
Adding visibility to the money management process will ensure consumers keep a tighter hold on their finances, while the single point of contact will help them avoid feeling overwhelmed by the sheer volume of accounts they must manage. In this respect, it seems that PSD2 is coming just at the right time. By placing control back in the hands of the customer (third parties must be given express permission to access financial data), money can be managed with greater efficiency and transparency, which in turn can hopefully help to cut the levels of debt.
The onus is now on financial services providers, including debt collection companies and creditors, to work together, be more open to sharing information, and to provide a stronger, more joined-up experience for customers. In addition, offering clearer and more comprehensive service will also allow the financial services industry to build a stronger, longer-term relationship with their customers. The open APIs of PSD2 will help providers transition from the traditional model of products and services, and allow them to offer a new kind of tailored financial consultancy. Providers can become a trusted partner, helping to inspire an innovative, and potentially lucrative, form of customer loyalty.
Regardless of the terms of the UK’s forthcoming Brexit strategy, the arrival of PSD2 is a game changer for the financial services sector, allowing the industry the opportunity to become closer to their customer base; speaking with them directly and serving them in a way that will improve their customer satisfaction. It will enable financial service providers to become an even critical part of a customer’s financial planning process. For consumers, money management is set to become easier than ever, helping them better manage debt and keep a clear head when it comes to their wallets.