Does borrowing behaviour influence wellbeing?

Posted on 1 July 201926 September 2019 by david.collings

by Sara Davies

Standard Life Foundation recently commissioned us to conduct a rapid evidence review to understand people’s borrowing behaviour and how it impacts their financial wellbeing. This involved a structured, critical analysis of around 150 relevant items and an assessment of their methodological strengths and weaknesses. We found:

Income strongly influences borrowing behaviour. Low-income households are less likely to use consumer credit than those on higher incomes, but more likely to use high-cost lenders when they do borrow, often to make ends meet.
Owning assets has some relation to borrowing behaviour. Homeowners have higher levels of borrowing than non-homeowners; their borrowing is linked to their level of housing assets. However, we lack evidence on the effects of savings on borrowing.
Psychological factors shape borrowing behaviour, but not as much as socio-demographics. There are complex interactions between different psychological factors; and one can mediate (and moderate or amplify) the effects of another. Psychological effects seem less powerful in explaining borrowing behaviour than other personal factors, such as income.
Macro-economic conditions play a major role in shaping people’s financial situations, their access to borrowing and the cost of borrowing. Aggregate consumer borrowing rises when macro-economic conditions are good and falls when they deteriorate. At firm level, credit card design and marketing (such as credit limit increases and zero-interest offers) encourage borrowing. Speed, convenience and easy access attract borrowers to use high-cost credit, particularly where they have few other credit choices.
Lower financial literacy is linked to poor borrowing behaviours and over-indebtedness. There are concerns young people, with lower financial capability overall, are particularly at risk from poor borrowing decisions. The evidence is weak regarding the impact of financial literacy programmes (which tend to focus on financial knowledge) upon financial behaviour

Read more about this research

Report | Key Findings

Older and poorer communities are left behind by the decline of cash

Posted on 16 May 201926 September 2019 by david.collings

by Daniel Tischer, University of Bristol; Jamie Evans, University of Bristol, and Sara Davies, University of Bristol

An increasingly rare sight.
ShutterStockStudio / Shutterstock.com

A future without cash seems almost inevitable. Recent statistics paint a damning picture: while cash accounted for 62% of all payments by volume in 2006, this dropped to 40% in just a decade and is predicted to fall yet further to 21% by 2026.

Digital payments, on the other hand, are trending strongly in the opposite direction. Contactless payments in December 2018 in the UK were 28% higher than the same month in the previous year (at 691m in total), while the total number of card transactions increased by 12% over the same period.

In the long term, such a shift may well have benefits for many, given the speed and convenience that digital payments offer. But in the meantime, in the next five to ten years or so, there remain lots of people still dependent on cash – particularly those who are older or from lower income households. These people, it seems, are at risk of being forgotten if current trends continue. Ironically, those who are least likely to need cash have the best access to it.

Cash still king for many

We know there is still a sizeable proportion of the UK population that continues to depend on cash. An estimated 2.2m people report that they only use cash, while there are as many as 1.3m people who are “unbanked” (do not have a current account).

In our research, we regularly encounter people who find it difficult to access mainstream banking products, do not use digital payments because they find it easier to manage their money in cash, and/or simply lack trust in digital banking. For these people, cash very much continues to be king.

This means it’s important to understand the way in which access to cash is changing for the UK population. But much of the debate so far has focused on the overall number of ATMs or bank branches in the UK, without much understanding of the importance of geography. Where these dwindling number of ATMs are located makes a big difference.

Indeed, when this was studied in the early 2000s, we learnt that bank branch closures and fee-charging ATMs were more often found in poorer parts of the country. The issue was then seemingly remedied by measures such as the “Financial Inclusion Programme” put in place by LINK, the UK’s main ATM network. This programme incentivised ATM operators to provide cash machines in lower income neighbourhoods.

More and more people are relying on post offices for cash.
Michael J P / Shutterstock.com

In our new research, we therefore sought to reexamine the geography of cash provision, using Bristol as a case study. Through detailed mapping of the city’s cash infrastructure, we found stark differences in access to cash between different types of neighbourhood. Sites of economic activity, perhaps unsurprisingly, are well served; as were some of the most deprived, relatively central, neighbourhoods.

But we also found that areas we classify as “squeezed suburbs” – relatively deprived areas on the fringes of the city – were poorly catered for. This represents a significant challenge for some of the older and less well-off residents in these areas, who are most likely to depend on cash. We found Post Offices, which offer cash withdrawals and some banking services, are often geographically best-placed to serve these communities and could be a crucial asset moving forward, at least if used correctly.

Deprived areas worse off

There are signs that the situation is now changing again. Recent research revealed that around 1,700 ATMs nationwide changed from free to fee-charging at the start of 2019, likely the result of lower overall demand for cash and a recent drop in the interchange fees paid by banks when someone withdraws cash from another company’s ATM.

This was also noticeable in our research, as we gathered data both in October 2018 and March 2019. Importantly, we found that such changes were happening more often in deprived areas. Over two-thirds of the ATMs that became fee-charging in Bristol over this time period were within particularly deprived neighbourhoods.

This seems to be because ATM infrastructure in more deprived areas tends to be non-bank owned. Comparing a relatively affluent part of the city (Whiteladies Road in the Clifton neighbourhood) with a more deprived area (Stapleton Road in the Easton neighbourhood), we noticed that while just 29% of ATMs in Whiteladies Road are non-bank owned, this rises to 89% in Stapleton Road. Some such non-bank ATM owners have publicly stated that they will convert more free ATMs to fee-charging ATMs following the recent reduction in interchange fees.

This could have far-reaching implications for already under-served communities. So, while a future without cash may be almost inevitable, if the patterns found in Bristol are replicated nationally, it is likely that we’ll see a return to old geographies of financial exclusion, with deprived communities struggling most on the journey there.

Daniel Tischer, Lecturer in Management, University of Bristol; Jamie Evans, Senior Research Associate, University of Bristol, and Sara Davies, Senior Research Fellow, University of Bristol

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Read more about this research

Responding to citizens in debt to public services – a rapid evidence review (PDF)

Voices from the frontline of debt advice – new research on supporting clients in vulnerable situations

Posted on 28 November 201826 September 2019 by david.collings

by Sharon Collard and Jamie Evans

In this post, we explore key findings from our new research, which looks at the experiences of nearly 1,600 debt advisers when supporting people in vulnerable situations.

At the recent Talk Money conference, we launched new research, in partnership with the Money Advice Trust and the Money and Mental Health policy Institute, looking at debt advisers’ experiences of working with clients in a range of different situations that might make them ‘vulnerable’.

The research was based on a UK-wide survey of 1,573 debt advisers working in approximately 400 organisations and included new data from a survey of nearly 400 individuals with lived experience of mental health problems and debt.

The report, Vulnerability: the experience of advisers, brings together these new findings along with good practice guidance for supporting those in vulnerable situations.

So, what does the report actually tell us?

1. Vulnerability is an everyday occurrence for advisers

Firstly, it’s apparent that advisers across the sector are dealing with clients in very vulnerable situations on a regular basis.

Of the 87 clients that a typical full-time adviser deals with in a working month, they can expect 35 to disclose a mental health problem. A further seven clients tell them about an addiction of some sort, be it a gambling problem, alcohol problem or other substance addiction.

Each week, nearly two-thirds of advisers encounter at least one client with a serious physical illness or disability, over a third see someone with a learning disability and one-in-five help a client who is, or has been, in an abusive relationship.

Lastly, in the last 12 months, nearly three-quarters of advisers encountered at least one client who disclosed suicidal thoughts, and over half seriously believed that at least one client was at genuine risk of suicide.

2. Levels of vulnerability may have increased in recent years

As this is the first time that levels of vulnerability have been measured across the whole advice sector, it is hard to say precisely how things have changed over time.

However, there is certainly anecdotal evidence from the advisers we surveyed that they are seeing more people in more challenging situations than ever before – with the risk that financial vulnerability exacerbates other types of vulnerability and vice versa.

3. This may just be the tip of the iceberg

For the purpose of consistent measurement, we asked advisers in the survey to tell us about those clients who disclosed their situation, rather than all clients that they believed to be in such a situation. This means that our statistics could represent just the ‘tip of the iceberg’.

Indeed, in our survey of advice clients with mental health problems, we found that as many as 44% of people with mental health problems may not disclose their condition when dealing with a debt adviser.

This could equally apply to a range of other situations, such as domestic abuse and addictions. Clients will not tell advisers everything just because they are there to help them and understanding the reasons for under disclosure is important.

4. More support is needed to help advisers deal with these situations

The primary goal of debt advisers is, of course, to help people resolve their debt and money problems; however, in many cases these financial issues cannot be resolved without considering the underlying situation.

Our data shows that more could be done here. For example, at present, 44% of advisers have not received any training on supporting clients with addictions and 56% have not received training in relation to gambling.

Such training though is on the way via the Trust’s Wiseradviser programme which is launching addictions and suicide prevention courses in the New Year.

It is also apparent that many people in vulnerable situations find it challenging to go through the debt advice process. For example, of those we surveyed with mental health problems, 48% reported that making initial contact with the advice agency was difficult, while 56% encountered difficulty in finding the information advisers needed from them.

The guidance and practical tools in our report can help advisers consider some of these issues.

5. But changes to debt advice alone are not enough

Our research also looked at the wider issues that affect advisers’ ability to support those in vulnerable situations. This highlighted the fact that many advisers felt they are working in an environment which makes it difficult for them to provide the very best support for their clients.

It takes time, money and resources to provide the right support, and in many cases advisers felt these are severely constrained. Advisers also noted that there are often situations where clients could benefit from the support of external services, but these simply do not exist locally or are already over-stretched.

While these bigger issues require co-ordination and collaboration from the advice sector and beyond, we hope our research and guidance give frontline advisers and advice organisations some useful additional tools and resources to support their invaluable work with clients in vulnerable situations.

Vulnerability: the experience of debt advisers was funded by the Money Advice Service. The report is available to download here, where you can also find data tables and a resource pack with additional tools to help advisers support those in vulnerable situations.

Further information about Wiseradviser training is available here: www.wiseradviser.org.

This article was originally published as part of the Money Advice Trust’s Thoughts at the Trust blog series. Read the original article here.

Bringing experts together to help people in vulnerable situations

Posted on 18 May 201826 September 2019 by david.collings

by David Collings

Last year the Personal Finance Research Centre organised a series of workshops to explore practical ways to help people in financial difficulty who have mental health problems or are in other ‘vulnerable situations’. Today, for Mental Health Awareness week, we reflect on the series and the positive changes that can emerge from events like these.

Our 2017 workshops were arranged around three key themes: suicide and debt; gambling and debt; and money, mental health and ageing. They brought together more than a hundred experts from different fields and disciplines with an interest in these areas. These experts included health practitioners, academics and researchers, financial services providers and commercial organisations, people working in the advice sector, regulators, and others who support and campaign for people in vulnerable situations. They included both senior stakeholders and individuals who are community-based and working ‘on the ground’. Crucially, some of our speakers and participants were ‘experts by experience’ — bringing to the table the indispensable perspectives of people with lived experiences of mental health problems and other vulnerable situations.

As we’re all aware, the role of experts has had a notoriously bad press in recent years. But our experience of this type of event — i.e. those that bring together a broad range of professional and interested parties — is that they help to push forward thinking in a particular area and to drive positive, practical changes. These workshops proved to be no exception.

At two of the workshops we asked people to fill in ‘commitment cards’ with one small action that they would take after the event based on what they had learned. We followed up participants to see whether they had fulfilled their commitment, and this showed a wide range of impacts, both big and small, that a workshop series can achieve. You can read more about the workshop series and its impact in our booklet which is available to download here.

The positive developments that can emerge from this kind of event were further highlighted this week when we learned that Monzo, one of the participants at our September Gambling and Debt workshop, is working on a feature that lets people block transactions to gambling sites from being made on their account. As you can see, my colleague Jamie Evans was particularly excited to hear about this:

We were delighted to learn from Monzo that the workshop discussions helped shape their ideas for this feature. But, of course, the workshop is just one part of a much bigger picture. The development of this self-exclusion feature will also have been informed by an army of expert voices, including our colleagues at the Money and Mental Health Policy Institute, organisations like GamCare, the Gambling Commission, and of course the team of financial difficulty and vulnerability experts at Monzo, their developers and the Monzo community forum.

Workshops such as these provide a valuable platform for people to collaborate and share experiences with others working in related fields, to reflect on practices and to learn from each other and think about new or different ways of working. They also offer an opportunity to bring in the perspectives of experts who haven’t written anything down, but who nonetheless have important contributions to make. This particular series also served to remind us that we are just one part of a much wider community of engaged professionals and interested individuals who are passionate about improving situations for those living with mental health problems and other vulnerable situations.

So, what’s next?

How about considering if there is a small step you or your organisation could take to improve the way you engage with people facing mental health problems or other vulnerable situations?

We are grateful to the ESRC for providing funding for the workshop series.