Inclusive payments for rising living costs

Financial strains are continually being placed on new groups of people by the cost-of-living crises. The Payments Association has submitted a report to the government and regulators outlining the new groups at risk and what can be done to create a more inclusive system in light of the “mortgage meltdown” warnings and the fact that more people than ever before are choosing to make cash payments in September 2023—the first increase in ten years.

According to the paper Navigating the rising cost of living: Payments innovation as a game-changer, people from a wider range of backgrounds are finding it difficult to keep up with rising energy costs. Not to mention how rising interest rates impact mortgages, rent, and the value of houses; inflation affects the cost of food, groceries, and gasoline. Over a million individuals lack access to banking, and many of the most impoverished pay the highest costs for essential services due to the poverty premium.

The Project Inclusion of The Payments Association

In this regard, Project Inclusion from The Payments Association has reported to Parliament its suggestions for cooperation and ingenuity to mitigate the effects of the UK’s poverty premium and rising cost of living.

It describes which groups have recently become the targets of financial exclusion, how payments and fintech innovations can help them (e.g., through welfare reform), and collaborative steps that the public, private, and third sectors can take to pave the way for more accessible, affordable, and inclusive financial services.

“The purpose of The Payment Association’s Project Inclusion is to educate and collaborate with government, regulators, and organizations in the third sector,” stated Tony Craddock, director general of The Payments Association. Our objective is to offer concise explanations of cutting-edge payment methods that can lessen the burden of poverty and financial exclusion. We work together to accomplish this, as well as by starting provocative initiatives and offering insightful feedback on laws and regulations.

The MPs, along with representatives from banks and regulators, unanimously agreed during the report’s discussion that cooperation and unity between the public and private sectors will be essential to guaranteeing that consumers have improved access to customized financial products and services amid the cost-of-living crisis.

The main topic of debate was how to use advances like artificial intelligence (AI), open banking, security frameworks, and data-sharing to promote the financial stability of groups including newlyweds, gig economy employees, and Universal Credit claimants.

Overcoming financial marginalization

The research highlights newly underserved populations, the types of financial exclusion challenges they experience, and how technology and innovation should be democratized to benefit them. It is based on interviews with payments businesses, third-sector entities, and local councils.

These coalitions are:

• Working families who utilize benefits to supplement their income (representing millions of individuals in low-paid employment who are first-time applicants for Universal Credit)
• The embedded underserved, which includes persons with restricted access to digital resources and gig economy workers
• The erratic owners, who stand in for younger, less resilient first-time homeowners who are currently in danger.

The head of The Payments Association Advisory Board, Neil Harris, said: “It’s a privilege to have this chance to introduce the study, its conclusions, and suggestions to Parliament. This is the first of many proactive measures to include the business community and decision-makers who can offer the means of support, and to speak on behalf of the people who are most impacted by financial exclusion. We’re putting a lot of effort into advancing this story and the urgently required financial inclusion initiatives.

“Our work is vital in providing key insights into how payments innovation is currently aiding those most affected by the cost-of-living challenges, as well as highlighting areas where additional cooperation between the industry, policymakers, and third sector is essential,” stated Pooja Bhachu, Project Inclusion project lead at The Payments Association.

“We hope that today’s discussions on these important topics have sparked much-needed action to improve financial inclusion across the UK. Our goal is to bring about collaboration and clarity on innovations, which could help reduce financial exclusion.”

The specific suggestions for modification are as follows:

• urging the Department for Work and Pensions (DWP) to establish a Universal Credit sandbox so that entrepreneurs can develop new goods and services without requiring government commissioning.
• support for innovation with a focus on financial inclusion services, using a strategy that encourages innovators to work in collaboration with the nonprofit sector.
• enabling the third sector to recognize the problems associated with the crisis in the cost of living and actively look for scalable solutions in collaboration with entrepreneurs.
• Enabling more non-traditional providers to provide early intervention tools by establishing policy and regulatory frameworks for customer-led data sharing between services, particularly in the field of AI-powered debt and money counseling.
• Examining the rules governing the use of data in financial services, such as affordability checks, in order to spur innovation in goods and services that suit the demands of the modern consumer, regardless of income level, and that complement the flexibility of work and life.