Broken trust: building back better

Scott Dawson at DECTA explains the importance of fixing broken trust during an economic downturn

 

We’re experiencing an era of economic uncertainties and cost-of-living crises. In such times, the spotlight must turn towards increasing trust as a means of keeping the millions of people who will be affected by the current economic situation inside the financial mainstream. 

 

It’s estimated that 4% of the British population remains unbanked, on the fringes of the financial system primarily due to economic hardship. This financial exclusion carries a heavy annual cost of £485 per person and seeing data breaches in the headlines doesn’t help (Revolut was recently hit by a highly targeted cyber-attack). 

 

In tough economic times it is critical thar consumers trust the brands they engage with to ensure security of their payments…and businesses want to retain that engagement and protect their bottom line. The key here is trust. But it’s a two-way street. Financial institutions (FIs) need to trust their customers, even if their lives and finances are complicated, and those customers need to be able to trust that their FIs are a superior alternative to informal banking. 

 

At the crossroads of this trust question is technology, which is where customers and financial institutions interact and therefore where trust begins.

 

The realities of the cost-of-living crisis

Today, the cost-of-living crisis is casting a shadow over many British households and businesses. We have spiralling inflation, energy prices, and stagnant wages that have all combined to create a challenging economic environment. Households are dealing with rising bills, petrol costs, and housing expenses, while businesses are also feeling the pinch due to rising operating costs. This means more allocation income to meet basic needs – leaving little for savings or investment back into their businesses.

 

For business in the payment space, they are potentially at even greater hardship to their peers. While companies in the energy, groceries and fuel spaces are reporting record profits, other businesses stand to lose out as consumers’ money is more stretched. Payments companies do well when there is a lot of transactions taking place and there could be far less during an economic downturn.

 

If the UK does experience a recession soon, then the financial challenges faced by the population are likely to intensify – and the question of trust will be even more vital. Consumers won’t want the added risks of using unproven services. Critically, payments should not only work and cost as little as possible, but be secure, forming part of a trusted ecosystem.

 

Businesses will have to do more than ever before to show that they can be trusted. The key to this is not just telling but showing potential customers that they are a safer alternative to both established banks and the informal economy. Even though businesses might be short on funds their most pressing question will be whether customers trust them.

 

The role of fintech

The fintech sector has a pivotal role to play in helping consumers and businesses through innovative solutions that improve everyday lives. Fintechs are uniquely positioned to bridge the gap between the unbanked or underbanked and mainstream financial services by fostering trust.

 

This is achieved by showing customers that you are on their side: providing a cost-effective service, genuine value in the solution, terms that don’t unnecessarily exclude people, as well as transparency and security are all vital to not just retaining current customers (consumers and businesses) but bringing in those who might otherwise be excluded.

 

I’ve always advocated a back-to-basics approach for businesses, and companies proving themselves through what they do rather than what they say.

 

Payments companies have a role to play here too. For example, those that create bespoke payment systems instead of integrating one-size-fits-all solutions will be best placed to help develop ways for companies to offer solutions that fall outside of the financial mainstream.

 

In doing so, it will also enable companies to simplify the complexity that can lead to financial exclusion. For example, many people on the financial margins need to send money abroad or interact with their banks that may be in other countries. Multi-currency payments support means that they won’t face extra charges every time they use their current card for payments.

 

Coupled with the ability to deploy digital banking platforms, this also means that people who can’t get into branches but can access the internet are able to have full access to finance.

 

Promoting trust in trying times

Overall, tough economic climates underscore the urgency of addressing trust in the UK’s financial systems. Fintechs have a pivotal role to play in this endeavour, offering innovative solutions that create trust and build upon the momentum to get more people engaging with their finances digitally, while priming businesses with the best platform for sustained success. 

 

By actively engaging in efforts to promote trust during these trying times, fintechs can not only contribute to economic resilience but also ensure that progress made in this crucial area is sustained and enhanced for the benefit of all.

 

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Scott Dawson is Head of Sales and Strategic Partnerships at DECTA.

 

Main image courtesy of iStockPhoto.com