Improved insight through Financial Strategy Segments

In order to get more in-depth insight into the behaviour of some of the most financially-stressed groups, we have provided first-party Financial Strategy Segment (FSS) analysis. It delivers person and household-level segmentation based on distinct financial lifestyle types which comprehensively reflect the underlying factors that influence consumer behaviour.

They include typical financial products, favoured holdings, consumer behaviour and future intentions, as well as summarising each segment’s key socio-economic and demographic characteristics.

FSS groups are specifically named to reflect the critical financial aspirations of a cross-section of demographics. They include younger so-called Bright Futures, Single Endeavour, Young Essentials, and Growing Rewards, through to more mature segments such as Family Interest, Seasoned Economy, Platinum Pensions and Sunset Security.

During the past decade there have been unprecedented changes to the UK economy and the impact this has had on the way consumers use financial products and services. Our FSS analysis goes beyond Mosaic in that it helps further map the demographic impact of changes. Following the global financial crisis, demand and availability of financial products has changed significantly. Institutions constantly review and revise lending criteria, while regulators are now imposing stricter controls and guidelines.

It means consumers and specific demographic segments, which may have relied on available credit to maintain lifestyles, have now been obliged to adapt or change their behaviour. At the same time, those with significant financial assets may have been looking at ways to mitigate risk to safeguard their future and maximise earnings from our historically low interest rates.

The analysis offers a different perspective on fraud, financial vulnerability and an indication of who, how and where it is committed among a handful of key groups that pose a disproportionately higher risk of both committing fraud and falling victim to it.

Key segments
Single Endeavours are young people in their 20s and early 30s striving to get established in the workplace. They have yet to settle into long-term homes and re mostly renting affordable accommodation from private landlords. Their finances are yet to settle down and overdrafts are often used. Savings are not yet a priority and this group generally enjoy this stage of life with low commitments. Significantly, the findings show that the so-called Single Endeavours FSS segment is the most at-risk group from both first and third-party fraud. They represent less than a tenth of the UK population but are deemed to be responsible for more than 24 per cent of first-party fraud and represent nearly 20 per cent of third-party fraud.

The Balancing Budgets demographic represents families in their middle years with average income. In many instances they are juggling their expenses against their resources. They generally own affordable terraced and semi-detached homes, often with a sizeable proportion of their mortgage still to pay. Use of credit is mostly sensible – with the exception of a few whose spending has exceeded their income. But household savings are limited and the Balancing Budgets’ segments welcome any opportunities to reduce their overheads.

But while the segment only represents around 13 per cent of the UK population, the Balancing Budgets are deemed responsible for nearly 15 per cent of firstparty
fraud attempts and fall foul of nearly 12 per cent of third-party frauds.  Mortgages, automotive finance and insurance are particularly at-risk products among this segment.

Bright Futures is also a high-risk third-party fraud segment. As the name suggests, the demographic consists of young professionals in their 20s and early 30s. They live alone in modest homes – some have opted to get on the property ladder while others have chosen to continue renting. Incomes are often above average and as a whole they have good potential to rise further as careers progress. Finances are generally stable but with highly disposable incomes, reflected by busy social lives and a youthful outlook. Financial planning is not necessarily a top priority.

At present Bright Futures represent 5.4 per cent of the UK population, but according to our analysis the segment is victim to a disproportionate level of third-party fraud, at 16 per cent.

The figures and volume of first-party fraud reflects the level of financial stress being felt by the Single Endeavours and Balancing Budgets’ segments, as the continuing squeeze on their personal finances takes its toll. As cash flow becomes more acute there are clearly more attempts at misrepresenting affordability, credit positions, income and personal finances.

At the same time the Bright Futures, represented by well-paid inner-city flat dwellers, aged under-30, make good targets for the fraudsters thanks to their
high-disposable incomes, relative affluence and relatively transient lifestyles. They are particularly at risk from identity fraudsters targeting high-value financial
products such as mortgages, loans, current accounts and credit cards.

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