Over the next two years NestEgg will deliver 10,000s more referrals for community finance.
We’ve just completed another dozen in-depth interviews with credit union members. As a result we’re better able to understand their money goals and the impact Covid-19 is having on their finances.
These recent interviews provided a contrast with a similar exercise undertaken two months before the pandemic set in.
Whilst long-term goals have remained the same: to save more, shorter-term goals are being set as a response to the pandemic. Setting up emergency funds. Paying down debt. These shorter-term goals are the focus for many.
People on lower incomes don’t need to be taught financial resilience; it’s part of their everyday planning. And has been for years.
I’ve not been affected that much by Covid-19. Life’s always been a struggle on a low income with two kids. I always try and put a few pounds away in savings, but need to do this more often. Paula – Member, Knowsley Mutual Credit Union
Another regular goal was paying down debts and County Court Judgments (CCJs) in order to get cheaper deals and avoid high-cost credit. Again, low-income households don’t need to be told about the dangers of high-cost credit.
Sins of my youth. That’s my priority. Paying off CCJs and defaults so I can get cheaper loans and deals. Steve – member Castle & Crystal Credit Union
They just need the tools to help them achieve their financial goals. In fact, we all do.
And this is where the NestEgg app comes in. We’re launching next month.
The best money tip I’ve every heard is to avoid home credit. And money lenders. They literally rip you off on purpose Anita – member Central Liverpool Credit Union
Our app provides over 200 ‘nudges’ helping people improve their credit profile. Financial health is presented as three indicators covering borrowing, spending and saving. Uniquely, these are mirrored in our decision engine dashboard – providing a shared view of credit risk.
Users of the app will
- Improve their credit scores. These have fallen fastest for lower paid workers since the pandemic.
- Reduce their credit card balances. Lower income borrowers were always close to their limits, but low paid workers were more likely to increase their balances since the pandemic began.
- Get on top of missed payments, which are starting to rise.
- Clear up historical issues. Credit union members in their late 20s and early 30s had clear goals to tackle older CCJs and defaults.
An opportunity for growth
Responsible lenders loan books have been falling. Carnegie UK found that between April 2019 and April 2020, the volume of loans fell by between 52% and 74%, (depending on value). Declines over the same period rose from 1 in 5 to 1 in 3. Subsequently there has been a partial recovery. However, it will take time to re-generate lost revenue.
Interestingly this demonstrated, once again, that lower income households know all about financial resilience. Credit union members paid down debt and saved more. Lenders have, naturally, become more cautious as job uncertainty remains. But the High Street financial services providers will be declining many more people.
Barclays increasing bad debt provisions by £4.8bn, is the first of many similar announcements. As a result, bank declines are certain to rise. Banks are already tightening their lending criteria. Analysts are talking of Credit Crunch 2.
Regardless, the high street bank is already pretty unforgiving when an applicant has missed a payments. Credit scores have also been falling for those in low paid or precarious employment. It’s getting harder for people to find places to borrow. Lower-paid workers are just the kinds of borrowers credit unions and CDFIs can help and benefit from. As a result loan portfolios are better balanced between those in and out of work.
Furthermore, people want simplicity. Organising payment holidays with several creditors has been a hassle. A single, preferably lower, monthly payment will help. Consolidation loans could provide a growth opportunity. This is why we’ve also been developing product specific decisioning strategies for our lender software.
In their refreshed strategy for 2020, Fair4All Finance estimate that Covid-19 means 3m more people are in need of affordable credit. NestEgg will make it easy for those people to apply and get the loan they deserve. At the same time our app will nudge users to adopt regular savings habits. Consequently, resilience improves. As a result people are better able to financially recover from Covid-19 and prepare for future shocks.
More referrals for community finance
Over the last three months NestEgg has been building a network of organisations to refer loans to responsible lenders via our app. Applicants can see if they qualify before applying. As a result, lenders don’t spend money assessing declined applications. In the case of a decline, our nudges help applicants make the changes necessary so they can be accepted for a loan.
NestEgg’s app will help:
- Grow credit union and CDFI loan books.
- Banks and building societies find affordable loans for those they must decline.
- Money advice agencies make timely referral
- Training and education providers find finance for people looking to enter vocational or other education.
- Stakeholders who want to see responsible finance grow.
Sign up below to join our webinar on Wednesday 24 March at 10am. Find out how NestEgg’s app can help you grow community finance.