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New Report Reveals Latest Borrowing Trends

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A new report revealing the latest trends and future predictions in UK lending and borrowing has been launched by Lenvi, the leading provider of lending software and solutions.

The 2024 borrowing report is the 10th released by Lenvi, the firm that powers lending technology for the likes of Barclays, Santander, Metro Bank, and Admiral, after launching its first report in 2013.

The most notable trends include the growing importance of brand and trust for borrowing decisions and AI innovation, a dip in the number of people factoring green credentials into their decision-making and the growing popularity of BNPL (buy now, pay later). The report also reveals changing borrowing behaviours and perceptions of what is “acceptable”, as well as disparities among vulnerable groups.

Vulnerable and minority groups are up to twice as likely to use BNPL

The popularity of BNPL is particularly a concern for vulnerable groups, who, as the report reveals, are up to twice as likely to use BNPL.

Over half of those who have a mental health condition (55%) and those who have a cognitive disability (52%) have used BNPL, compared to just one in three (34% and 36%, respectively) people who do not. Previous research suggests that the uptake of BNPL among these groups is in part linked to impulsive tendencies linked with their conditions. People with certain cognitive disabilities may also struggle with accessing and understanding the complex documentation usually associated with finance applications, which explains the appeal of the frictionless BNPL journey. In fact, the report reveals that people who have disabilities, mental health conditions, or longstanding health conditions are up to 27% less likely to have had a credit card in the last five years. This highlights the growing need for buy now, pay later to be regulated to avoid financial harm while improving accessibility and financial education for vulnerable individuals.

BNPL is also more prominent among ethnic minorities, with six in 10 (60%) ethnic minorities having used it to borrow money compared to just one in three (35%) white people. Research suggests that people from ethnic minorities are more likely to seek help from financial providers, but BNPL allows these groups to bypass systems and processes that have historically been exclusionary. The report also reveals that they, as well as people with cognitive disabilities and mental health conditions, are more than twice as likely to rely on family and friends for a loan indicating mistrust, exclusion and a need for further support for these groups.

Sebrina McCullough, director of external relations at Money Wellness, adds: “While the findings of Lenvi’s survey are concerning, they’re also not surprising and very much mirror what we’re seeing. BNPL makes it easier to spend, especially when no other form of credit is readily available to you.

“It poses a particular risk to people with mental health problems, who are often more prone to impulsivity and memory loss. Keeping on top of payments is a struggle, especially if they’re juggling several at once.

“We’ve supported customers who felt they were being chased relentlessly for BNPL debt, which can also worsen mental health conditions. And we are concerned that without regulation – that now won’t be happening before the election – and proper protection, more and more people will find themselves spiralling into a cycle of debt.”

Vulnerable groups are “survival” borrowing

Borrowing in general is more likely for some vulnerable groups, with over half of people, such as those with mental health conditions (54%) and cognitive disabilities (51%), and minority groups, such as LGBTQ+ (56%) and ethnic minorities (50%), most likely to have borrowed in the last 12 months. This is likely linked to “survival borrowing,”  compounded by the cost of living crisis, as poverty and financial hardship are more prevalent among these groups.

For example, according to Experian, 62% of LGBTQ+ people have experienced financial problems because of their gender identity or sexual orientation, while ethnic minorities are half as likely to have savings as White household. In particular, people with cognitive disabilities, mental health conditions and long-standing illnesses are more likely to rely on borrowing to cover unexpected shortfalls than those who do not, while ‘privileged’ groups borrow much higher amounts for single transactions suggesting that they take a longer term approach to borrowing. Vulnerable groups are also more likely to be concerned about making repayments.

Richard Carter, CEO, Lenvi says: “Our report highlights the growing need for Buy Now Pay Later and other forms of embedded finance to be regulated. It is no wonder that frictionless lending is popular among people who have historically been excluded from the lending market due to complex application processes, less than clear information and strained relationships with financial services firms. But while it can help with day-to-day money management when used correctly, it should not be encouraged for survival borrowing.

“Embedded finance is here to stay, but lenders must focus on creative solutions that will generate positive friction and save the most vulnerable from financially and mentally harmful situations. For example, a third (36%) of borrowers agree that financial services firms should offer counselling support to vulnerable customers, while one in five (20%) think lenders should introduce pre-application meditation to help prevent impulse purchase.”

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