Generational divide, economic influence and a universal view of a customer

There’s an opportunity across financial services to help people in many ways. While today’s economy could be described as ‘nervous’, people’s economic attitudes are somewhat indifferent. People express concern about their future well-being yet their spending traits suggest no contingency is being developed – this is causing the ‘squeezed middle’ to be even more vulnerable, especially as mortgage rates rise, inflation increases and wage increases remain slow.

“More than 350,000 people are in families where average incomes just about fit their current outgoings.”

Today, people are living and drawing pensions for longer. In the last 10 years, more than a million people who would have bought houses, have rented instead. We’ve seen a decline in young first‑time buyers, and re-mortgages now account for a large share of the market. There’s a marked gap between the old and the young, owners and renters, and the ultra-affluent and the rest of the population.

From our analysis, we can see how trends correlate between fraud and risk. As the economy is squeezed, we start to see an upward trend in fraud. In 2014, when disposable incomes start to decline, first party fraud and third party fraud climbs and continues to do so with levels today 40% higher than they were. With rising house prices and a slowing economy, it would be vigilant to consider mortgage fraud threats as a concern, particularly with the substantial rise seen in third party fraud this year[1].

There’s a need to understand the cause of fraud. That means we can help to reduce it through education and providing the integrated help to prevent it being the only option for those on the cusp of vulnerability. Are people aware that giving false information could classify them as fraudsters? In some cases, this misrepresentation is caused by not being able to access the data to input. For example, not fully knowing their financial commitments and therefore providing information they assume to be correct based on purely memory. Some, of course, are genuine fraudsters.

There are tools available, such as new data sources like open banking, which can give a better understanding of an individual. It can negate the need for giving information as it can prepopulate details based on what’s seen in a bank account transaction. New data such as this, while not fraud data specifically, can make the application and customer journey much more informed and help towards reducing this type of fraud, which may be causing the upward trends we’ve seen in the last four years. However, businesses need to be able to link and match the various data sources to specific individuals to benefit most.

People are also vulnerable and fraud is most often committed when an individual is in a vulnerable state. Therefore, by understanding the wider trends of an individual, you can better help them before the problem escalates.

For more insights, check out our latest UK&I Fraud Report.

Experian UK & I Fraud Report 2018