The role of digital in tackling consumer debt

Monday the 18th January has been dubbed Blue Monday.

The role of digital in tackling consumer debt

According to researchers, this third Monday of the month is the most depressing day of the year for many of us, as we struggle with terrible weather, a lack of motivation and a poor financial situation.

While Blue Monday was created as a PR stunt back in 2005 by a British holiday company, it is a reality for many Brits as they struggle to cope with debts incurred over Christmas. In fact, according to recent figures published by the Bank of England, families borrowed a total of £1.5 billion during this past festive season.

Our own research also highlights the extent of the problem. Nearly a third (31 per cent) of consumers consider it essential to run into the red in order to fund Christmas. Plus, over a quarter (26 per cent) will have missed at least one debt repayment and incurred a late fee as a result.

Even if amassed over a short period, debts like this can easily spiral out of control. So, how can banks and financial services providers help their customers overcome this situation?

According to our research, more than half of people (54%) say they would repay larger amounts of debt if their bank provided them with a financial management tool linked to their bank account. It’s clear that digital has an important role to play in helping customers overcome these Christmas “debt hangovers”.

HSBC has recognised this. It has recently announced the introduction of a new financial management app, which uses “nudge theory”. The app, which uses software to analyse customers’ account data and identify spending habit trends, sends regular and targeted digital “nudges” to make people more aware of their spending.

Here at Intelligent Environments, our Interact® Collect tool also aims to address this challenge. The platform, which features tools such as a budget calculator, and a variety of payment options, enables people to log on to a personalised portal to view and settle their debt on-line, or on a mobile or tablet, anywhere they are, regardless of the time of day and without the embarrassment of others listening over their shoulder.

Peak spending times throughout the year can be hugely stressful. Banks should be doing all they can to help their customers through this challenging time. In an age where digital technology is engrained in almost every aspect of consumers’ lives, debt management should be no exception. By providing easy access to digital budgeting and debt management tools, banks will enable customers to better manage their spending.