Marqeta, the global modern card issuing platform, released new data from a survey of European consumers on their attitudes and experiences of lending. The findings, which will be detailed in an upcoming report on the future of lending, shows many consumers still feel frozen out of the lending bubble, held back by outdated lending criteria and assessments – such as credit scores. Yet change could be on the horizon, with 59 per cent of European consumers saying they are more aware of new lending options due to the pandemic, with 61 per cent being more willing to use them.
The survey of 2,000 European consumers, conducted by Propeller Insights on behalf of Marqeta, found that 32 per cent said they had been denied a loan because of their credit score or affordability. However, 59 per cent of those refused felt that decision was unfair, while 79 per cent believed they could have secured the loan if other factors were considered. Concerningly, 33 per cent of respondents who had experienced challenges in securing credit said that being denied a traditional loan forced them to turn to more expensive options – such as a payday loan. Unsurprisingly, most respondents (78 per cent) remarked that there must be a smarter way to assess loans than credit scores and 72 per cent said that credit assessments don’t reflect whether or not they are able to pay.
Anna Porra, European Strategy Director at Marqeta comments: “With the cost of living rising and many people struggling, providing access to finance to those that need it is essential. Yet the current lending system often penalises people, which is a sign that things are broken. It’s crazy that someone living frugally, paying rent, and saving for the future is often lumped into the same box as someone living beyond their means who doesn’t have a mortgage or other financial commitments – the two are not the same. With open banking and wider access to rich data, there are so many different factors that can help determine whether someone can afford something. New lending alternatives have done a great job at capitalising this to help give people greater choice, but it’s clear more education is needed to help people to better understand their options.”
When looking at alternative financing routes, it was clear that awareness is growing, and people are selecting providers for very specific benefits. For users of flexible payment cards, flexible payment options were the main benefit they had gained, whereas the top reason for those using Buy Now, Pay Later was that it helped them to manage their finances better. Users of open banking services said the main benefit was that it made it easier for them to take out credit. This indicates that the industry is moving to a more flexible and inclusive model of lending that is more tailored to specific needs and outcomes.
More broadly, the data indicates that many consumers are looking for more from their lenders to enable greater control, personalisation and rewards:
76 per cent of people surveyed agree lenders should offer ‘no default bonuses’ for good repayment records
67 per cent of people surveyed want a more engaging, less transactional relationship with their lender
61 per cent of people surveyed are interested in having funds issued to a dedicated Visa or Mastercard card to better track spending, along with real-time advice on financial behaviour
69 per cent of people surveyed are open to pre-agreed spending controls, if it means more competitive rates
71 per cent of people surveyed like the idea of a Visa or Mastercard card that offers personalised rewards with specific merchants
Porra concludes: “While traditional banks remain popular, interest in digital propositions is growing. The winners of the future may be the organisations that can get a really clear understanding of their customers, their spending habits, and their level of affordability. By knowing their customers better, lenders can make fairer decisions, while still driving down risk. Cards present an opportunity for banks to modernise and fintechs to grow market share as they deliver real-time insights that enable just outcomes for borrowers and lenders alike. Consumers want a better, more informed borrower experience – cards are well placed to help meet these expectations.”
