Digital money tools ‘could help people with problem debts’

Many people needing help to manage problem debts are unlikely to be managing their money digitally, analysis has found.

Credit reference agency Experian analysed more than 200,000 anonymous client records from StepChange Debt Charity.

It found that the vast majority (88%) of clients are highly engaged with the online world, using the internet to access a wide range of services and entertainment websites, including social media, gaming and streaming video.

But a significant proportion, at 40%, are highly unlikely to manage their finances online such as using money management tools and online banking.

People with young families were found to be the most likely group to be using online banking and digital money management tools.

Older clients and retirees are the most unlikely clients to be using online financial management tools, the research found.

But Experian said that digital money management tools can help people in difficulty to save money and avoid or reduce the impact of a financial crisis.

Experian and StepChange will continue to work together to look at potential solutions for how clients might gain better control of their money.

The charity is also about to launch a new online hub to help people with persistent credit card debt.

Giving examples of how technology can help people to manage their money better, Experian said credit score apps, product comparison apps, mortgage apps and energy switching apps can all help.

It estimates that households who have not switched energy provider in the past 12 months could be paying as much as £255 more annually than they need to.

MoneySavingExpert.com’s free-to-use “cheap energy club” helps people see if they could be making savings and switch onto a cheaper deal.

Research by Experian also suggests that home owners could find themselves overpaying by around £1,800 annually if they fail to re-mortgage when their introductory offer ends and they slip onto their providers’ standard variable rate (SVR).

Peter Tutton, head of policy, research and public affairs at StepChange Debt Charity, said: “No-one is pretending that digital tools can solve the nation’s debt problems, but they can certainly help, and there is the potential for new services that can better engage those who are financially insecure.

“Although most people who get into debt are in that situation because of a change in circumstances, helping people to manage their money and build financial resilience as a matter of routine means that they are likely to be in a better position to weather shocks if and when they do occur.”

James Jones, head of consumer affairs at Experian, said: “It would be easy to think that today we are all using digital technology for the same things and at the same rate of consumption.

“However, what we’ve discovered is that clearly isn’t the case.

“Fintech (financial technology) tools are transforming the way many of us manage money.

“However, it’s clear from our findings that a significant chunk of people seeking help with problem debt appear reluctant to use online financial tools, which poses an interesting challenge for the debt advice sector and society at large.”

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