Holidays and Home Improvements on Hold as Consumers Cut Back on Spending Despite Growing Confidence

As the UK lockdown eases, there are some positive indications that the financial shock of COVID-19 is also abating, according to TransUnion’s study tracking the impact of the pandemic.

The latest research from the global information and insights provider shows over a quarter (27%) of UK households now do not expect any future financial impact as a result of the pandemic, almost double the figure (14%) when the study began in March.

This demonstrates the steadying effect that the support schemes and provisions in place have had, with one in five (20%) households having received a form of financial forbearance from their finance provider, most commonly for personal loans and mortgages.

Nearly half (49%) have cut back on discretionary spending to help them navigate their way through the pandemic, with the research showing nearly six in 10 (57%) people are delaying holidays and over a quarter (26%) are putting off home improvements.

Kelli Fielding, managing director of consumer interactive at TransUnion in the UK said: “Our research confirms that the initial shock has now subsided and that’s thanks in part to the support that’s been offered to consumers. However, with seven in 10 of those impacted still worried about their ability to pay bills – with credit cards, utilities and rent payments causing most concern – it’s no surprise that discretionary spend has been cut. As a result, consumers have limited means to support the government’s drive to reboot the economy as shops and restaurants reopen.”

Perhaps unsurprisingly, the study shows that younger consumers have been more willing to spend through the crisis, with fewer Gen Z’ers cutting back on discretional spending, but the data also highlights some worrying concerns for the future.

Brendan Le Grange, director of research at TransUnion in the UK explained: “Whilst it’s great to see an increase in consumer confidence, it’s important to be mindful of the long-term implications of this pandemic. Of those who have been financially impacted by COVID-19, over a fifth (23%) have cut back on their saving for retirement and one in 10 (11%) have actually dipped into their retirement savings to get by. As a result, even when their incomes return to pre-crisis levels, there’s going to be a significant dent in their finances that could affect their future means and ultimately their standard of living in later years.”

As we move into the latter half of the year, finance providers need to continue working closely with customers to help them maintain the best financial position possible. According to TransUnion, more than a fifth (21%) of consumers are hoping to extend the provisions in place for another few months, whilst four in 10 (41%) would like to structure their payment plans so they can catch up gradually while paying their regular monthly commitments.

AML specialist SmartSearch breaks into US market

Leading UK anti-money-laundering (AML) firm SmartSearch is today launching operations in the USA.

Expansion into the US market follows a period of sustained growth that has seen the firm frequently named among the UK’s fastest-growing companies, and a leader in the increasingly important ‘RegTech’ sector. SmartSearch’s unique ‘one-stop’ Know Your Customer (KYC) and AML platform enables clients to perform full electronic ID verification and screening in just two seconds, and provides ongoing monitoring to alert users to any change in a client’s status.

Simple to use and manage, SmartSearch enables firms to streamline and automate their customer onboarding process, leaving them free to run their businesses. The full suite of AML checks can be performed remotely, with no need for face-to-face contact or physical documents to be exchanged. There is also a fully-integrated SmartSearch app to allow checks to be performed ‘on the go’. With the Covid-19 pandemic still a significant factor in many US states, this provides a significant competitive advantage for SmartSearch compared to manual document checks.

The platform has also recently incorporated biometric facial recognition for additional security, and there are well-advanced plans for further enhancements.

With experts and global watchdogs warning that there is an increased risk of money-laundering in the current crisis, firms need to be especially vigilant. SmartSearch provides a safe and cost-effective solution to meeting all regulatory requirements and protecting businesses from fraudulent activity.

SmartSearch expects that its solution will prove popular with US clients, as chief executive John Dobson explains: “We have developed a bespoke product for the American market so that US firms using SmartSearch have the same absolute confidence as those in the UK, that their AML checks are up-to-date and fully compliant with relevant legislation at all times.

“Our combination of cutting-edge technology and friendly, efficient customer service means SmartSearch is already one of the UK’s leading RegTech firms. Our client retention rate of 98% is testament to the high level of service we consistently deliver.

“We want to bring those assets to bear in the US market, while continuing to deliver day in, day out for our UK clients.”

Markus Kuger, Chief Economist at business decisioning data and analytics provider Dun & Bradstreet, comments on the latest real GDP figures below. The figures show a significant economic contraction since lockdown began in March, with all sectors of the economy shrinking significantly between March and May 2020, ranging from a 12.0% drop in agricultural output to a 38.8% fall in the construction sector.

He said: “Despite some positive signs and green shoots of growth in the UK’s GDP figures for May, the latest analysis from Dun & Bradstreet predicts that the UK economy will contract by 8.5% in 2020. As social distancing measures are likely to stay in place for the foreseeable future, and businesses face further disruption and uncertainty as the end of the Brexit transition period approaches in December 2020, Dun & Bradstreet expect that the economic recovery will be modest and gradual across the majority of sectors. Dun & Bradstreet is maintaining its ‘deteriorating’ risk outlook and our country risk rating for the UK remains at an all-time low [since we began ratings]. Our data has also shown a worrying trend for worsening payment performance and we expect the number of late payments and business failures to increase in future quarters as the full impact of the economic contraction caused by the pandemic becomes clearer.”

Connect appoints two new relationship managers to support growing base

Connect for Intermediaries, the specialist network, packager and referral partner, has appointed two new relationship managers, to support its ever-increasing network of Appointed Representatives, and the growing number of brokers utilising its packaging and referral services.

The new appointments reflect Connect’s continued strong performance as the market emerges from lockdown and its ambitions for future growth.

Darren Fletcher, who joined Connect for Intermediaries as lockdown was beginning, will cover London and the South-East. Darren is a highly-experienced relationship manager having worked in the financial industry for over 10 years and having managed a panel of 1700 firms in the past.

Emma Roberts, who has worked in Specialist Lending for 10 years as a key account manager both supporting and helping brokers. She joins Connect from Positive Lending and previously worked for both Fluent Monday and Santander. She brings a wealth of experience and will help to support Connect’s brokers in the North of England, to place those specialist cases they may find challenging.

Connect’s sales director Kevin Thomson says, “Over the past 12 months, we have achieved significant growth in the number of our Appointed Representatives, as well as the number of brokers coming to us for our referral and packaging services.

“We are putting plans in place to grow the Connect network further and significantly over the next few months. We are therefore strengthening our relationship management team to ensure we can continue to provide the high level of support all brokers have come to expect from us.

“Darren and Emma will be valuable additions to the team and will continue Connect’s focus on adding as much value as possible to the brokers we work with.”

New Report from Corinium and FICO Signals Increased Demand for Artificial Intelligence in the Age of COVID-19

Today, FICO, a global analytics software firm, released a new report from the market intelligence firm Corinium that found the demand for artificial intelligence (AI), data, and digital tools is soaring as the COVID-19 pandemic continues to put a strain on many enterprises.

Conducted by Corinium and sponsored by FICO, the report – Building AI-Driven Enterprises in a Disrupted Environment – surveyed more than 100 c-level analytic and data executives and conducted in-depth interviews to understand how organizations are developing and deploying AI capabilities. The study found that the uncertainties caused by the pandemic have forced many organizations to adopt a more committed, disciplined approach to becoming an AI-driven enterprise, with more than half (57 percent) of the chief data and analytics officers saying that COVID-19 has increased demand for AI, digital products and tools.

Enterprises are seeking new AI-driven ways to mitigate risks and navigate through uncharted territories in the current economic environment. The report reveals the central role AI has in shaping the future as global markets work through and begin to recover from COVID-19; as well as how to mitigate future risk and disruption going forward.

Some key findings include:

Organizations Rally to Add AI Capacity

Most data-driven enterprises are now aggressively investing in their AI capabilities, in fact 63 percent of respondents have started scaling AI capacity within their organization. However, enterprise chief data and chief analytics officers are facing a wide range of challenges as they increasingly look to grow AI. 93 percent say ethical considerations represent a barrier to AI adoption. Other barriers identified include:

  • Building a team with the right skill set (66 percent)
  • Integrating new technology with legacy systems (62 percent)
  • Regulatory and compliance risks (60 percent)

Ethical and Responsible AI

More than 93 percent of respondents said that ethical considerations represented a barrier to AI adoption within their organizations. However, as pointed out in the report, “ensuring AI is used responsibly and ethically in business context is a huge, but critical task.”

Half of survey respondents said they have strong model governance and management rules in place to support ethical AI usage, making this the most common approach to tackling the challenge. However, more work is needed to ensure ethical AI usage as 67 percent of AI leaders don’t monitor their models to ensure their continued accuracy and ethical treatment.

“Being ethical is not being blind to what’s in the model,” said Dr. Scott Zoldi, chief analytics officer, FICO. “Organizations need to ensure that AI is designed robustly and is explainable, transparent, built ethically and governed by auditable, recorded development process that is referenced as data shifts over time.”

When asked which business areas are pushing for greater AI responsibility with an organization, data and analytics leader said:

  • Board of directors (60 percent)
  • Data, analytics and AI (53 percent)
  • Legal or compliance (52 percent)

AI Enables Post-COVID Competitive Advantage

From better customer experiences and reducing financial crime to automating business processes and improving risk management, respondents believe AI will help their organizations secure a competitive advantage.

Four Asian market reports published by Atradius

Leading trade credit insurer Atradius has published four new reports on the markets of China, India, Indonesia and South Korea.

The country reports detail the impact of the coronavirus pandemic on each market with an overview of the economic and political situation and a future outlook for key industries. The reports are designed as an information tool for firms doing business overseas, enabling them to monitor trading risks and opportunities.

Report highlights:

  • China: The coronavirus outbreak severely hit the Chinese economy in Q1 2020, immediately impacting retail and wholesale, travel, leisure, catering, real estate, transportation, and shipping. Chinese GDP contracted 6.8% during Q1 with Atradius economists forecasting a sharp decrease in the economic growth rate in 2020, down to 1.5% from an increase of 6.2% in 2019. The subdued performance is driven by a crippling of China’s manufacturing and industrial output earlier this year. A comprehensive rebound is constrained by lingering weakness in domestic demand and sluggish demand from overseas markets which is expected to lead to a decrease in exports by more than 7% year on year. Business insolvencies are also forecast to increase sharply this year, mainly affecting the SME segment.
  • India: The repercussions of the Covid-19 pandemic have hit an already weakening economy in India where the economy grew just 5.3% in 2019, the lowest annual increase in more than six years. Atradius forecasts GDP to contract 5.7% in 2020 with both investment and industrial production forecast to contract while exports are expected to decline by almost 13%. Extended supply disruptions from China have hurt those Indian industries reliant on imports while business insolvencies are forecast to increase by more than 30% year on year.
  • Indonesia: A sharp downturn in economic growth is expected in Indonesia with a forecast contraction in GDP of 2.7% in 2020 after growth of 5% in 2019. Private consumption growth, a main driver of Indonesia’s economic expansion, is expected to decrease 2% this year. Indonesian exports are forecast to decrease by more than 10% in 2020. However, with exports accounting for just 22% of GDP, Indonesia is less susceptible to global trade downturns than some other Southeast Aisan countries.
  • South Korea: Following GDP growth of 2% in 2019, the South Korean economy is expected to fall into recession this year with the coronavirus pandemic disrupting regional supply chains and affecting global growth. Atradius forecasts a 0.7% contraction in GDP in 2020. As the world’s leading producer of displays and memory semiconductors and the second largest shipbuilder, South Korea’s exports account for about 50% of GDP. Delayed shipments of parts from China have impacted businesses, forcing them to operate below capacity; industrial production and exports are forecast to contract by 1.5% and 7.7% respectively in 2020. A further deterioration of external demand could weigh on company profits of buisnesses in export-dependant sectors with insolvencies expected to increase sharply in 2020.

Criteria searches up 68% as mortgage market adjusts to ‘new normal’

The latest figures from Knowledge Bank’s mortgage criteria activity tracker show brokers’ searches up by more than two-thirds (68%) as the market responds to Covid-19 and adjusts to the ‘new normal’. The increase was especially pronounced in the residential market, with searches up by nearly four-fifths (79%).

With physical valuations and viewings beginning to resume from mid-May, demand has bounced back strongly and this is reflected in the increased search volumes in June.

At the same time, the terms brokers searched for most frequently showed less fluctuation than usual, as Covid-19 continued to dominate for the third month running. Across the residential, buy-to-let and bridging categories, the top five searches were the same as in May, albeit with changes in the order.

In the main residential category, both ‘Covid-19: Temporary Maximum LTV Restrictions’ and ‘Furloughed Workers’ featured heavily for the third month running. The ‘Temporary Maximum LTV’ term was also strongly represented in broker searches in the buy-to-let, second charge and bridging categories.

Knowledge Bank has responded to this increase in demand by establishing a weekly Criteria Clinic, enabling brokers to discuss the issues and hot topics they are most concerned about with a panel of experts from a cross-section of lenders.

There was slightly greater fluctuation in the second-charge, commercial and self-build markets, but only in the traditionally volatile equity release category was there wholesale change in brokers’ criteria searches, with four of the top five searches changing compared to May, and ‘Early Repayment Charges’ resuming the top spot it last occupied in March.

Matthew Corker, lender relationship manager at Knowledge Bank, commented: “Lenders have been very active in June, withdrawing and then reintroducing higher-LTV products. Many have also adjusted their affordability and allowable income criteria, as details of the extension to the Government’s furlough scheme become clearer.

“It is no surprise to find that brokers are searching more frequently for these criteria. As demand returns to the market, lenders and brokers are having to move fast to stay ahead of the curve. Brokers cannot expect to keep up with the huge number of criteria changes without deploying technology. A criteria database like Knowledge Bank is invaluable to brokers operating in the new normal.”

Experian partners with Global Data Consortium to bolster international customer identity verification

Experian and identity verification provider Global Data Consortium (GDC) have today announced a new partnership which will transform customer onboarding journeys for both international and new-to-country customers.

The agreement enables Experian clients to onboard customers rapidly, as well as strengthening anti-fraud measures and meeting Know Your Customer (KYC) and Anti Money Laundering (AML) compliance requirements.

By harnessing GDC’s global network of Consortium Members sourced from more than 50 countries around the world, clients are able to leverage their insights in order to accurately confirm the identity of customers who are based abroad. The solution will also assist individuals who are new to a country but are unable to access financial services, such as a bank account, because the financial provider lacks the necessary information to approve the application.

Creating a seamless onboarding process and authenticating a person’s identity is a priority for many businesses. Yet Experian research found 70% struggle to confirm identity without it impacting the customer journey, and 53% only have a ‘medium-level’ of certainty when identifying customers.

By confirming identity quickly and efficiently, businesses can act with confidence they are onboarding legitimate customers, increasing their level of acceptance and boosting revenue and growth.

Micah Willbrand, Managing Director of Identity and Fraud, Experian, said: “With Covid-19 increasing the rate of digital transformation, it’s critical businesses of all shapes and sizes are confident that their customers are who they say they are, and at the same time create as frictionless an experience as possible.

“Working with GDC and their market-leading coverage, our UK and global clients alike will benefit from the ability to onboard and verify customers in a seamless, integrated way. The new solution gives assurance the individual is genuine and suitable for the products they offer, and ensures a consistent and smoother customer experience, no matter where they are.”

William Spruill, President of Global Data Consortium, said: “We’re extremely excited at the opportunity to partner with Experian and their CrossCore ecosystem.

“The combination of GDC’s local data sources and Experian’s global reach and expertise has been brought to bear in a global-API and will produce compelling outcomes for customers around the world.”

Leicester lockdown – economic commentary

Data from Dun & Bradstreet’s Covid-19 Impact Index shows that the probability of default for businesses in Leicestershire is 1 percentage point higher than the national average (2.5% compared with 1.4%). Markus Kuger, Chief Economist at business decisioning data & analytics firm, Dun & Bradstreet: “The introduction of stricter lockdown measures in the city will be heavily scrutinised as local authorities try to balance minimising the spread of COVID-19 with limiting the negative impact on local businesses starting on the road to recovery after the national lockdown.

“According to our COVID-19 Impact Index, which assesses business risk and disruption at a regional level across England, Wales and Scotland, the probability of default in Leicestershire is over 1 percentage points higher than the national average (2.5% compared with the national average of 1.4%). This is particularly concerning given 96% of businesses in Leicestershire are small and medium enterprises (SMEs) and are more likely to be negatively impacted by the continued restrictions and economic slowdown. A survey Dun & Bradstreet commissioned before the pandemic found nearly three-quarters (73%) of SME respondents believed the government could do more to support small businesses and government-backed loan schemes will be more important than ever for businesses as they face more disruption to demand and supply.

“The impact of any local lockdown measures in the UK will depend on the size and economic role of the area in question. Even small scale lockdowns in remote areas can have a significant ‘ripple effect’ on supply chains as we saw earlier this year when the European automotive industry was impacted due to the disrupted supply of essential parts manufactured in a small town in Northern Italy. Analysing the supply chain data available will be key to assessing risk and business continuity planning. Dun & Bradstreet is maintaining a deteriorating outlook for the UK economy and support for small businesses and the effective use of data and analytics will be critical to ensure survival through these turbulent times.”

FSB in Scotland on Chancellor’s Statement

Today Chancellor Rishi Sunak delivered his Summer Economic Update.

Andrew McRae, FSB’s Scotland policy chair said: “Good news has been in short supply for nearly four months. We needed action to help protect jobs and stimulate local economies across Scotland and that is exactly what the Chancellor has set out to do.

“However, it should be noted that there are many small businesses that were not supported by the Chancellor’s package – with company directors once again overlooked. Given these businesses have had little to no support in over 100 days, FSB is hoping that support can be provided in the near future.”

On the “kickstart” jobs scheme, Andrew said: “The jobs scheme will hopefully prevent a lost generation of young people, but for it to work in local economies, it must focus on the small employers who employ around one million people in Scotland. We can’t have a situation where local businesses are behind a queue of big corporates because of a target-driven approach.”

On the temporary VAT cut for hospitality and tourism sectors, Andrew said: “Reducing VAT in sectors hit especially hard by the pandemic is an astute move. It will make everyday activities like grabbing a coffee and cake more affordable for budget conscious consumers – while making the country a more attractive destination for tourists home and abroad.”

On the discount to encourage people to eat out, Andrew said: “Scotland is fortunate to have an array of fantastic food offerings in restaurants, cafes and pubs across the country. We need to encourage more people to get back out into the community and spending money, so any moves to do this are welcome.”