A new report from the United Kingdom-based The Payments Association suggests the area’s burgeoning Fintech sector can play a key part in helping folks emerge from poverty.
Navigating the rising cost-of-living: Payments innovation as a game-changer analyzes the cost-of-living crisis and poverty premium in the UK. Fintechs and payment innovators can support customers during these hard times. They can also make things better longer-term.
Take the COVID-19 pandemic and inflation that is outpacing wage growth, and many people, especially those with lower incomes, are feeling the squeeze. April’s inflation rate was 7.8%.
The report states UK fintechs are perfectly positioned to alleviate the strain. The sector added £44bn to the UK economy in 2022, 20% more than it did in 2021. That growth is credited to more tailored options for payments, saving, borrowing, and managing money, which bypass a traditional banking system that is more expensive and less accessible to those on low incomes.
The report identifies groups needing more assistance, including those on the lowest incomes. It suggests market solutions already available to support them.
Helpful changes include:
- Providing open technical standards for the government’s social payment infrastructure;
- Developing a rulebook that defines how government payments operate;
- Structured funding for social sector-led payment innovation;
- Fostering a launchpad for the sector’s ideas and insights into the financial lives of those in need; and
- Reconnecting house associations with local financial support services.
“Payments innovations can help people strengthen their financial capabilities, make them more resilient to financial shocks, and improve their long-term financial security,” Pooja Bhachu, director, Public Policy, UK&I, Mastercard, and project lead for Project Inclusion at The Payments Association, said: “But industry and policymakers must work together to harness this innovation. They can do that by improving access to digital financial services, creating new services that are inclusive by design, and improving the regulatory environment for fintechs who are tackling social issues.”
“Industry and policymakers must work together to open up and improve access to digital financial services and take active steps to involve those people most affected by financial exclusion and the ongoing cost-of-living crisis,” Neil Harris, chair, The Inclusion Foundation, and chair of The Payments Association Advisory Board, added. “With this report, we hope to not only move the discussion forward but catalyze much-needed action.”
The Payment Association’s purpose for Project Inclusion is to inform and collaborate with government, regulators and third-sector bodies to provide clarity on innovations and solutions in payments that can reduce financial exclusion and the poverty premium. The method is collaborating with industry bodies, developing thought-leadership campaigns, and informing regulatory and legislative decisions.
