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FCA Financial Lives Survey 2020 – What About The Credit Industry 4 MARCH 2021

FCA Financial Lives Survey 2020 – What About The Credit Industry
5 minute read

The FCA released their annual Financial Lives Survey on 11 February, engaging with over 16,000 respondents through over 1,300 questions. We’ve reviewed the report and outlined the key findings of this that will impact all of us in the Credit Industry.


Pre covid the number of UK consumers at risk of vulnerability had fallen from 51% to 46% between 2017 and 2020, driven largely by decreased digital exclusion and improving financial resilience in consumers.

The report does however focus on the increasing pressures on mental health and accessibility of services.

42% of adults with poor mental health or low mental capacity or cognitive difficulties admitted that they found dealing with finances over the phone confusing or difficult.

The general theme across the vulnerability spectrum is that dealing with financial institutions is an unnecessarily difficult process, causing stress and confusion for consumers.

Add to this the heightened stresses of financial difficulty in our industry, and it becomes clear that we must do more to support consumers.

A business model that allows consumers to engage through their preferred methods with clear and concise communication is critical to us helping vulnerable customers return to financial and personal health.

Financial Resilience

14% of UK adults (7.2 million) were over-indebted before covid with 7% of UK adults in financial difficulty. These numbers will have increased dramatically through 2020, with institutions already feeling the increased volumes and results season showing increased bad debt provisioning across the industry.

As the end of the government furlough scheme draws nearer, consumers already struggling financially could be plunged into even greater financial difficulty resulting in substantial increases in default rates across all forms of credit.

The importance of customer-facing operations to be able to deal with the scale of increase is key in minimising the impact of this to business and consumers.

Adopting and maximising the benefits of available technologies, giving customer-facing staff the tools to support consumers or having effective credit strategies will all be key factors to ensure we are able to deliver successful outcomes as we progress through 2021.

Trust In Financial Servies

Only 42% of adults held confidence in the UK financial services industry, although this is up from 31% in 2017. With adults showing signs of vulnerability or over-indebtedness more likely to lack confidence.

Whilst this is very much an area of improvement, it still demonstrates that the majority of consumers lack trust and confidence in our industry. This simply must continue to change, the credit industry is uniquely well placed to build trust with consumers in what are some of the most difficult times in their lives.

Ensure we treat customers as individuals and understand their own unique circumstances is essential to this. Customer-facing staff are best placed to improve these scores, and investing in training and development for staff will only achieve better outcomes for consumers and businesses.

Digital Access To Essential Banking Services

As the world continues to rapidly move towards digital solutions, this presents both issue and opportunity to the credit industry.

Mobile banking continues to grow as the dominate method among younger consumers, with online banking growing in popularity among older consumers. The report does however highlight the continued reliance on cash and branches for consumers.

This proves that there is no best one path channel as customers increasingly look for flexibility in how they engage with us.

Although an industry typically slow to embrace new methods, the report demonstrates how essential it is to implement technology alongside our existing models to support customers.

Although finances are already stretched, investing in a businesses credit operations can lead to improved business results and ultimately have a positive impact not only on a business P&L but to positively impact consumers lives as well.

The Impacts And Experience of Covid-19

As we as an industry have already seen over the last 12 months, covid has had a profound impact on the credit industry.

The number of UK adults showing signs of vulnerability increased to 53%, a 15% increase from February to October as well as 27% of UK adults having low financial resilience from 20% in February.

38% of UK adults have seen their financial position worsen overall through 2020, highlighting the very real possibility of a surge in customers across the credit industry.

Whilst great work has been done throughout 2020 to support customers, the deadlines on government support and payment holidays will further increase the pressures faced throughout our industry into 2021.


We have all seen first hand how challenging 2020 has been, and 2021 shows the signs of continuing in this way.

The credit industry is facing a mountain of challenges in the coming weeks and months, but we can take pride in the work we have done in the last year as well.

It is critical that we as an industry continue in our businesses in order to provide the service that consumers expect and deserve.

2021 will present a unique opportunity for the credit industry. Whether you are implementing technology, training people or redefining strategies and processes, Arum will be here to help you deliver throughout.

Tom Morgan

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