In the midst of enduring cost-of-living strains, recent research conducted by Tink sheds light on the significant hurdles faced by younger age groups in their pursuit of credit accessibility. Drawing insights from a survey encompassing 1,000 UK borrowers, the findings underscore a pervasive trend of impediments encountered by the 18-34 demographic.
A striking revelation from the research reveals that over three quarters (78%) of individuals aged 18-34 have encountered loan application rejections. Factors contributing to these rejections include a thin credit history, cited by 12% of respondents, and challenges in substantiating financial history, reported by 11% of participants.
Moreover, the research unveils a growing trend of younger borrowers abandoning cumbersome loan applications, indicating a pronounced aversion to friction-laden processes and a missed opportunity to leverage available financial services. Alarmingly, nearly a quarter (22%) of 18-34 year olds have opted to abandon loan applications and seek alternative lenders due to the arduousness of the application process. Additionally, 20% of respondents abandoned the loan application midway despite possessing the requisite documents, attributing their withdrawal to the need for manual document submission.
Echoing these sentiments, a survey of 200 UK lenders substantiates the challenges outlined by borrowers, with 36% of lenders identifying manual income verification as the stage witnessing the most significant drop-off in the loan application process. Furthermore, cumbersome manual processes emerge as a drain on resources for lenders, with 32% citing manual income verification as the most time-consuming step and 25% flagging document validation as the highest cost.
In response to these challenges, younger borrowers express a willingness to grant lenders access to their transaction data from bank accounts in exchange for streamlined application processes and enhanced loan approval prospects. Encouragingly, 40% of 18-34 year olds surveyed endorse the idea of digitally sharing transaction data to streamline the application process, while over half (57%) advocate for tailored loan options that align with their financial circumstances.
Jack Spiers, Banking & Lending Director at Tink, emphasizes the importance of leveraging data-driven risk decisioning solutions to facilitate fair and accurate affordability assessments, thereby eliminating barriers associated with manual application submissions. Spiers underscores the mutual benefits accrued by borrowers and lenders alike through the adoption of these models, enhancing customer acquisition rates while reducing operational costs.
As the financial landscape evolves, addressing the challenges faced by younger borrowers in accessing credit stands as a critical imperative. By embracing innovation and prioritizing consumer-centric approaches, stakeholders can pave the way for a more inclusive and accessible financial ecosystem, empowering younger generations to navigate their financial journeys with confidence and ease.
