At first glance the joining of debt to solvency to savings may seem unlikely. When DIGIMASS adds in the concept of seeing this thread as a never ending spiral similar in concept to loop theory you might think we need medicating.
Well…. No - In order to change something some things must change….
The background to our thought collective is the combined experience of all our years in credit and debt collection. We at DIGIMASS have all lived through the growth of personal credit, the path to economic dominance of the financial services sector and the never-ending story of those categorised as caught in the poverty premium trap. Those customers in need of short-term credit and categorised as high-risk profile borrowers, segmented into struggling and/or squeezed consumers.
However they are to be defined we seem to have lived with millions of consumers falling into serious levels of indebtedness for the last 30 years.
Irrespective of how the economy has performed, the numbers of people in financial distress have been consistently high with the consequential pressure not only on the Free Advice Sector but also on Social Services and the National Health.
This is a circular, spiral-like cycle which will continue until we introduce disruptive concepts into the process.
In the background we have a burgeoning group of community interest services, charitable debt advice providers and national debt advice charities all attempting to deal with a tsunami of consumers seeking support in dealing with their financial circumstances.
The route to financial well-being isn’t a one-way street.
The recently published MAPS strategy document makes it clear that their role is to bring about a rational approach to marshalling a hugely diverse group of advice providers and combining their effort with better methodologies and outcomes in respect of production, promotion and delivery.
DIGIMASS is already promoting a digital ecosystem which, if fully developed, would have the capacity to underwrite not only a financial well-being strategy but a fully holistic debt advice service digitally integrated across all sectors .
Through digital intervention not only could the entire finance sector begin to deliver preventative methodologies, but it could also promote solvency and savings as a base-line target in tandem with offering credit (dare I say an alternative to credit), even credit tailored to being defined as ‘affordable’.
We need to use Digital leverage as a learning tool across the sector and target positive behaviour modification as our desired goals rather than just profit.
The other critical element to breaking the loop will, as explained in the MAPS strategy, be the role of education. It’s ironic that financial education was a pillar of the Crowther report some 50 years ago. However, if as a society, we truly want to support the private individual in developing better understanding, better money management and better financial decision making then a major shift will be needed.
Once again, digital solutions present the better opportunity for delivering change.
Who do you know over the age of 18 who doesn’t have a mobile phone?
Firstly, we are already a nation of digital “app” users, particularly the younger generation. What is needed is for digital apps, combined with the benefits of open banking technology and safety features, to help guide individuals in the right direction.
Why not make it obligatory for students to use an app to help them manage their student loan account?
Why not ask all the app developers currently focussed on developing lending products to use the same apps to encourage savings from disposable income?
Or where they identify income shortfalls against known expenditure
Why not offer support on better cashflow management through an appropriate app?
Finally, with the support of behaviour specialists, it is now feasible to find positive ways in which financial well-being modification can be achieved through the nudging of behaviour.
Message prompts, loot box rewards, nudge theory can all be used in positive ways to offer education and learning to all generations, not just children or students.
Do your lending products promote financial well-being? Are your App developers cognisant of regulatory requirements and aware of how they can use behavioural methodologies to deliver better customer outcomes? For an independent and informed review CLICK HERE to see what DIGIMASS has to offer.