Thursday 8 August 2019 6:00 am

Credit providers must learn to embrace new technology

Personal finance has a legacy problem. Until now, those who weren’t familiar with its inner workings have never truly understood financial products and services. 

A combination of technical jargon and a lack of clarity concerning the impact that certain decisions might have on a person’s credit rating has often left consumers very confused about exactly how most contemporary – and usually very basic – financial products actually work. 

However, both the Open Banking regulation and new financial technology have collectively made the means by which we manage our money easier, clearer, and much more transparent. 

The main catalyst for this has been the meteoric rise of new retail banks – these have enabled the sector to rebuild from the rubble of the global financial crisis. 


These banks are able to explain financial products in black and white, while simultaneously building an entirely new relationship with their customers through trust and loyalty. 

But despite this transformation, many companies offering traditional consumer credit have completely – and unfortunately – bucked this trend. 

Problems with personal finance

In fact, according to research conducted by Citizens Advice in 2017, six million credit card customers had their borrowing limits increased in the previous 12 months, without actually giving consent to their card provider. 

Evidently, unarranged overdrafts and unwanted credit are still being thrust in front of unwitting consumers. 

Once a new customer signs up to a credit agreement, more often than not they’re locked into an ambiguous and perplexing set of terms and conditions. No friendly payment reminders, no prescribed restrictions to curb an individual’s spending, and no safety net to eradicate the slippery slope of debt. 

Luckily, the flexibility and choice created by technology mean that we no longer need to just accept this as the status quo. 

Another issue which needs addressing is that, for some types of lending, third-party affordability checks are still not mandatory. In order to protect consumers and institutions, it’s critical that they become an indispensable part of the process.


This issue has meant that personal loans, typically acquired through unsecured credit, remain the fastest-growing form of debt in the US. 

My personal view is that scrutinising affordability through an independent credit scoring bureau is the best way of determining whether an individual is fiscally responsible, or to identify what level of credit they can comfortably afford. 

As we edge closer to deconstructing the once incomprehensible nature of personal finance, it’s clear that technological innovations are going to become more important than ever. For the good of consumers and the sector-at-large, long may this continue. 

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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