Richard Jenkings, senior consultant at Experian
What do today’s consumers look like? What are their attitudes to money, and how do they choose to manage their own? What financial services do they want, and how do they wish to be communicated with?
These are some of the deep questions businesses ask of their marketing, finance and customer care teams. And today, the available data can give us more insightful answers to these questions than a business has ever had before. The insights below from Experian’s Financial Strategy Segments (FSS) tool gives a fascinating overview of today’s consumers, at macro and micro level. The insights show a nation recovering from the worst recession since the Second World War, and now facing a period of uncertainty as Britain prepares to exit the EU.
The data shows the stresses and strains for the young when the first rung of the property ladder feels far out of reach, and how some families are coming together to help the generation at risk of getting left behind. The data also highlights the profound impact technology is having on the financial journeys consumers take today – from the rise of price-comparison websites to the use of banking and bill paying apps.
In an increasingly customer-centric world, it’s important to have a depth of knowledge into what makes a customer tick. With greater insight an organisation is better able to meet customers’ demands and expectations. By offering the most appropriate products, messages and channels, businesses can deliver a better customer experience and improve ROI, as well as ensuring they meet legislation and safeguard the company’s reputation.
Fresh insights into financial customer habits
So what’s changing the way people spend, save, borrow and live their lives?
- People are living longer and the average age of the population is increasing. Pensions need to be paid for longer, the costs of care are growing, and funeral plans and retirement living are an expanding market.
- In the last 10 years, more than one million people who would have bought houses have rented instead. We’ve seen a decline in the number of young first-time buyers, and re-mortgages now account for a larger share of the market.
- We’ve seen a significant polarisation of the population in terms of wealth, with the top percentage pulling away from the rest. There is a marked gap between the old and the young, between owners and renters, and between the ultra-affluent and the rest of the population. This is reflected in the growth of financial services catering to high net-worth individuals.
- Technological changes, from smartphone technology to faster and better broadband and Wi-Fi, have also had a profound impact on financial behaviour. The rise of ecommerce has shifted the purchase of goods and services away from physical outlets, while the advent of contactless payments has compounded a move away from cash.
- In the wake of the 2008 global financial crisis, PPI miss selling and other revelations, there has been a substantial loss of trust in financial services suppliers. This has led to stricter regulations, a reduction in sub-prime lending and a greater need for credit scoring to help organisations make careful and responsible lending decisions.
A snapshot of a nation
Experian has identified four key financial trends in the UK today. We explore how they’ve come about, how they’re likely to shift in the future and what they could mean for the way we market financial products and services.
The degree to which people’s levels of affluence are likely to change at different stages of their lives, and our ability to improve our financial future often follows a storyline.
Tax on inertia
Those who stick to old financial behaviours are likely to fare worse than those who actively seek change in a changing world.
Savvy switchers and digital devotees
Those who embrace new digital possibilities are more likely to switch and save.
Jilted generation and helping hands
An entire generation is less well off than the last – but help may be found close to home for family minded individuals.
At the same time, we see the emergence of new types of financial consumers:
- High net-worth individuals: The rise and rise of the ultra-affluent.
- Golden age: The growth of the very affluent retired.
- Young and struggling: Where making progress is harder than it was for previous generations.
- Deal seekers and switchers: The people in the middle making the most of their financial circumstances.
- Multi-generational families: Several generations increasingly coming together to act as one financial unit.
- High-equity elders: A generation that has reaped the rewards of house-price inflation and final-salary pensions.
Making sense of a changing world
As the gap between generations grows wider, it brings implications for both public policy and for financial services providers. The changing consumer landscape will mean fewer mortgages are needed, fewer retired people will release housing equity, and those nearing retirement will have less to spend on holidays and leisure. By being aware of these trends, providers can plan for change and market the best products to the people most likely to need them.
What is Financial Strategy Segments?
Financial Strategy Segments collates detailed financial behaviour data about every consumer in the UK: their demographics, personal equity, investments, borrowings, debt, attitudes, aspirations, and even preferred communications channels. The segmentation is tightly linked to each person’s age and affluence. It groups people together based on similar financial behaviours, by household and then by individual. This level of segmentation gives a deep understanding of consumers’ financial behaviour.
2020: the year mortgages went digital
By Francesca Carlesi, co-founder and CEO, Molo
It’s safe to say that the past year has changed everything. With restrictions in place that limited almost every aspect of our lives, from work to socialising, it’s no surprise that some industries were decimated and others were left severely shaken. The mortgage sector was no exception, as it also underwent a vast transformation which may have changed the course of mortgages forever.
The industry saw a paradigm shift, which was driven by consumers being forced online. This was the case for everything from mortgage applications to online house viewings and property valuations. As expected, this resulted in an increased demand for digital mortgage solutions with more flexibility.
While the industry was already slowly shifting, the pandemic has accelerated this and now the traditional process of getting a mortgage is increasingly coming under threat. We’ve seen a number of somewhat surprising trends over the last year that support this argument and suggest that consumers are embracing the change. For example, compared to March last year, we’ve seen the number of people aged over 45 applying for a mortgage loan increase by 70%. This indicates that consumers who may have previously resisted applying for a digital mortgage saw no alternative option in lockdown.
It seems that this paid off, as our data suggests that overall consumers were more satisfied with the simpler and quicker process.
A shift in behaviour
It’s clear that the pandemic did nothing to discourage those seeking a mortgage from doing so and the industry continued to grow. For example, in October last year, the UK mortgage industry saw a 13-year high, where over 97,500 loans were approved – the highest figure since September 2007, the month at the start of the financial crisis. But what led to this and why?
In a post-pandemic world of financial uncertainty and instability, the idea of purchasing property is now being perceived by many as a safer bet than investing in the stock market or other investment options.
As a result, buy-to-let properties are becoming an increasingly appealing option and Google has now coined it as ‘breaking out’. Not only did Google trends observe a 5000% increase in the search term ‘how to get a buy-to-let mortgage’ last year, but at Molo, our own data also supported this and found a significant rise in the number of first-time buyers who were mortgage hunting.
Despite being introduced twenty years prior to buy-to-let mortgages, let-to-buy mortgages also saw huge growth in 2020. The pandemic has led to increased numbers of remote workers and commuting has become a thing of the past. UK cities are seeing somewhat of a mass exodus as the priorities of city dwellers are changing and many are going in search of more space. Let-to-buy mortgages offer the flexibility to facilitate this. Investing in this kind of mortgage means that families, for example, can afford to rent out their property in the city and move to locations that are more rural.
We’ve also seen the industry pivot slightly in terms of regional demands. While there is continued demand from London and the South East, for example, we’ve also seen growth in areas such as the North West and we predict this won’t slow any time soon. One of the cities with especially high demand was Blackpool, where growth in demand was twice the national average.
Future gazing: 2021 and beyond
We’re expecting that the changes seen across the industry over the past will stick. After all, if even the sceptical customers were happy with the ease and simplicity of the online mortgage application and approval process, why on earth would they go back?
It’s important that we learn from these observations and use them to draw insight into the future of the mortgage sector. For instance, while Coronavirus has certainly caused disruption for lenders and consumers alike, it’s also highlighted the need for a more advanced, digital offering. It’s shown that digital mortgages really have become the best option for customers. The pandemic has been a test run for businesses and has proved that, even after restrictions are lifted, there is no good reason for mortgage providers to return to the traditional but slower business-as-usual.
At least in the property world, 2020 could well be remembered as the year that mortgages went digital. While it’s true that the pandemic was the catalyst for this shift, it’s now gone beyond the virus. The changes we’ve seen over the past year are likely to shape the mortgage industry for years to come.
EU finance chief says UK’s Northern Ireland move a breach of trust
DUBLIN (Reuters) – The European Union’s finance chief said Britain’s decision to make unilateral changes to Northern Irish Brexit arrangements raised questions over whether it can be trusted in future trade negotiations with any partner.
“It does open a question mark about global Britain, if this is how global Britain will negotiate with other partners. Our experience has been not an easy one to put it mildly,” Mairead McGuinness, who is negotiating post-Brexit financial services terms with Britain, told Irish broadcaster RTE on Thursday.
“We have to be very clear that when something happens that is not appropriate and indeed in our view breaches both trust and an international agreement, then we have to call it out. It wasn’t a good day yesterday but this morning we have to work for practical solutions, with the UK, not separately.”
(Reporting by Padraic Halpin; editing by John Stonestreet)
The Benefits of Starting A US Non-Profit: The Latest Tax Regulations
Starting a nonprofit organisation can be a very effective way of significantly improving your society’s welfare, and truly assisting those in need. Ultimately, however, understanding all the prerequisite steps mandated to start a nonprofit– as well as the legal obligations and privileges that can be associated with such a process, is crucial before fully committing to and moving forward with your business plan.
Growing a prolific, successful, and impactful non-profit can be a very tedious process and can commonly involve years of consistent effort, diligence, and determination. Consequently, this article will take a deep dive into the relative statutory and federal legislation and critically analyse the plethora of economic, monetary, and social benefits that starting a nonprofit can bring in for you.
Non-profit Organisations: A Quick Overview
Regardless of whether your goal is to address a particular societal issue, form a trade organisation or perhaps create a social club, if you are looking for the opportunity to earn a profit on top of accomplishing your stipulated goals, forming and operating a nonprofit organisation may be the way to go.
Contrary to most social clubs- which are formed to solely provide benefits for their specific members, nonprofits are generally created to provide benefits to the general public. These can include corporations created for educational, scientific and charitable purposes and- as we will further analyse below, are commonly exempt from paying corporate income taxation in accordance with Section 501(c)(3) of the Internal Revenue Code.
The Financial and Structural Benefits of Starting a Non-profit
As briefly touched on above, forming a nonprofit organisation can provide a plethora of benefits for you, these include:
- Tax Exemptions- companies that are categorized as ‘public charities’ in accordance with section 501(c) of the Internal Revenue Code are generally exempt from paying corporate income tax on a state and on a federal level. Additionally, after a company has obtained their aforementioned ‘tax exempt’ legal status, a person’s or company’s monetary donations to them is tax-deductible.
- Grant Opportunities- There’s a prolific amount of both public and private bodies that unilaterally limit their charitable donations and grants to public charities only. This is because nonprofits can- and commonly do, offer tax deductions to such individuals or corporate entities on an exclusive basis.
- Unique Corporate Structure- A nonprofit organisation operates as its own unique legal entity- completely separate from its owners and founders, and consequently is in a position to place its own interests and corporate ethos above the interests of the persons that may be associated with it.
- Limited Liability & Perpetual Existence- On top of having a statutory right to exist in perpetuity, nonprofits also have limited liability under the law. Therefore, any damages that may arise from potential legal disputes are limited to the real assets of the actual nonprofit, and not the assets of its founders and/or owners (subject to specific legal exemptions).
Final Overview: The Potential Disadvantages of Forming a Nonprofit
Despite all the advantages laid out above, it should be duly noted that there are a couple of potential disadvantages to forming a nonprofit that you may want to consider before moving forward with your plan.
Firstly, the process of forming a nonprofit can take a significantly long period of time and this is commonly associated with a great deal of both effort and capital. Moreover, in order to apply for some of the benefits listed above- including federal tax exemption, a monetary fee is required and the process also often needs a present attorney or corporate accountant to serve as a corporate consultant.
Furthermore, there are a couple of practical disadvantages to starting a non-profit organisation. These include: a) excessive paperwork- as all nonprofits are legally required to keep detailed analytical records of their practices and submit them to their relevant state de[artment and to the IRS, and b) limited personal control over the organisation- this is particularly the case in states that require nonprofit organisations to have more than one director.
Finally, nonprofits are commonly subject to prolific levels of public scrutiny- especially in relation to their finances, which may act as a disincentive for some private individuals.
Overall, starting a nonprofit can bring in a plethora of economic, monetary, and social privileges for the individuals involved, and- although the process can come with a few potential inconveniences, they are arguably a small price to pay. Companies like TRUiC advise on the varying benefits of different states when it comes to US formations. It is worth conducting thorough research before making your next move.
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