The state of financial wellbeing in Australia, the United Kingdom and the United States, and how collections can support

How have your customer’s finances changed over the last three years?

Since the depths of the pandemic, financial wellbeing has been slowly recovering. But, are consumers really making ends meet?

Across three of our biggest markets - the United States, United Kingdom and Australia, detailed hardship and financial wellbeing insights have recently been shared by key industry and regulatory bodies. Let’s unpack them to explore the statistics that every creditor should know in 2024, how they’re affecting your customers, and how your collections can go further to support.

The state of financial wellbeing in numbers

Take a look at the top five insights from Australia, the United States and the United Kingdom.

Australia

Unpacking ASIC’s Hardship, hard to get help report released in May 2024 along with Improving the Financial Wellbeing of Australians from the University of Melbourne and Commonwealth Bank, numbers indicate that:

1. 1 in 3 have low financial resilience, with 37% saying that they couldn’t handle a major unexpected expense

    

2. 1 in 4 struggle with daily money management, with 29% saying that they rarely have money left at the end of the month

    

3. Hardship notices related to home loans rose by 54% in Q4 2023, when compared to Q4 2022

    

4. Overcommitment, reduced income and medical issues are the top reasons for hardship notices

    

5. 1 in 3 are not on track to meet their long-term financial needs, impacting future retirement prospects

United Kingdom

Looking at the FCA’s Financial Lives report published in April 2024, Brits are still struggling with higher costs of living:

1. Over 1 in 4 are finding it difficult to cope, amounting to 14.6 million adults

    

2. 14% are struggling to keep up with their bills, including household costs and credit commitments

    

3. 1 in 9 have no disposable income, causing low financial resilience to any unexpected costs

    

4. 11% have fallen behind in the last six months, with utility bills and credit card bills being the most commonly missed payments

    

5. 36% of mortgage holders have seen their mortgages increasing over the last year, a 7% increase from the previous year

United States

Findings from the CFPB’s 2023 annual Making Ends Meet survey show that while American consumers may be better off financially than in 2019, many are still strained:

1. 38% are experiencing difficulty in paying their bills, often for basic household expenses such as utilities and food

    

2. 29% of consumers have less than $500 in their savings account, making credit cards their main source of available credit

    

3. Consumers with active student loan debt are 10% more likely to fall behind on regular payments, increasing to 16% for renters

    

4. More people are experiencing income variability (7% in 2023, compared to 5% in 2019), due to changing work hours, overtime or other flexible working situations

    

5. 53% of those with a credit card aren’t paying their full bill every month, causing ‘revolving’ debt from month to month. This is a 6% increase from the previous year.

How the current state of financial wellbeing makes a case for a new approach to debt collection

With the numbers painting a stretched picture of consumer finances, what’s the call to action for collections? Embedding more efficient practices.

At InDebted, changing the experience of debt collection means more than building leading technology such as machine learning and AI. It’s about shifting the perspective on debt, and making it easier for customers to find a way forward. Especially for those in the most difficult circumstances, collections can often be a bridge to sustainable payment options, the right support services, pathways for vulnerability, and much needed breathing space.

When it comes to those in hardship or vulnerable situations, building in layers of support around your collections operations means:

1. Proactively detecting hardship & vulnerability

Discussing debt can be overwhelming. Let’s take the UK for example, where 2 in 5 adults who have missed payments say they avoid speaking to their lender about their debts. Going further, 42% put off dealing with finances entirely by ignoring warning letters or communications. The takeaway? Even though customers may be struggling, recognising this isn’t always black and white.

Our omnichannel engagement can recognise signs of vulnerability in real time across all digital channels, not just through a conversation with an agent. To make identifying hardship and vulnerability more seamless, we’re always expanding the range of indicators flagged on our system based on real customer interactions. This means that more subtle signs of vulnerability and hardship are detected earlier, ensuring faster support for those who need a helping hand - regardless of what channel they’re contacting us on.

2. Support for those who need it

Once hardship or vulnerability are identified, what does effective support look like? There’s multiple factors here, including signposting to other services such as free debt advice. This was an improvement area highlighted by ASIC, who found that lenders sometimes fall short on their responsibility to provide additional support details to vulnerable customers. Clear and accessible signposting is also a requirement from the Financial Conduct Authority (FCA) in the United Kingdom, so we can see consistent expectations emerging from regulators around the world. For us, we see connecting customers with the right specialist services as our ethical responsibility, regardless of regulatory requirements.

To continue building effective support mechanisms, we’re enhancing our relationships with key consumer advocacy groups in each of our markets. This keeps us closely connected to specialist services, improved channels to liaise with advocacy groups, as well as opening up the dialogue around hardship and vulnerability insights.

3. Real customer advocacy

As a global collections agency partnering with a broad range of businesses (from subscriptions and utilities to financial services) and supporting millions of people at any given point in time, we’re in a unique position to share insights into how customers are experiencing debt, affordability and vulnerability. This includes leading indicators for financial difficulty such as increasing payment plan failures, and reasons for snooze periods, along with real time data around hardship requests and vulnerability tags on customer accounts.

When it comes to our internal employees, each of our teams play an active role in creating the right support mechanisms across a variety of initiatives, in addition to our day to day processes and duties. We’re currently launching a cross-functional customer advocacy group, bringing together team members from different departments and skill sets, from Marketing to Engineering. This forum will bring a fresh approach to protecting and advocating for customers, sharing new and different solutions to improving the customer experience of debt.

Innovating with empathy

No one chooses to fall behind. We all know what it’s like when life throws a curveball, and the numbers above show that consumers have been thrown more than one in the last few years.

Collections are an opportunity to truly change someone’s financial journey - whether that’s helping them set up a flexible payment plan, or referring them to a dedicated support service. Transforming collections from a moment of stress to one of relief means creating strategies that are equally compassionate and effective. The key? Innovating with empathy, at every step of the way.