Cost of living triggers dangerous era of ‘Financial STOICism’

A quarter (24%) of GB adults admit they are making bad financial decisions they know will negatively affect their ability to access financial products in the future - this figure rising to almost a third (32%) of adults aged between 25 and 44.

This stark finding is from YouGov research[1] commissioned by Synectics Solutions, a company which works alongside the UK banking, insurance and financial services sectors to identify risk and support financial inclusion.

From taking out short term loans and credit cards with no confidence of making repayments, to considering becoming ‘money mules’ to ease financial pressures, the cost-of-living crisis is triggering what has been dubbed an era of ‘Financial STOICism’ (Short Term Outlook Ignoring Consequences). A trend which could have serious implications for consumers and the banking sector.

The findings suggest that a worsening crisis could result in:

• Around 1 in 6 (18%) 35-44-year-olds considering taking out credit cards with no confidence in repayment ability
• 1 in 8 (13%) GB adults considering cancelling an insurance policy to save money
• Over 1 in 10 (11%) 25-44-year-olds taking out short term loans with no confidence in repayment ability
• 1 in 12 (8%) unemployed GB adults resorting to loan sharks because they can’t access finance elsewhere through traditional means
• 1 in 16 (6%) 18-24-year-olds taking payments to move someone else’s money through their accounts (become money mules)
• 1 in 25 25-34-year-olds changing details on financial application forms to gain better access to credit
•  1 in 25 (4%) 25-34-year-olds having to take out credit in a friend or relative’s name

“This isn’t just a case of tighter household budgets putting financial planning on hold”, commented Russell Mackintosh, Chief Commercial Officer at Synectics Solutions. “People are being pushed to the brink. At best they are knowingly risking future access to banking services and weakening credit scores. At worst, they are taking or considering actions that could be viewed as fraudulent – a trend we are also, sadly, seeing in our own data.”

Synectics Solutions is a UK Government Specified Anti-Fraud Organisation which partners with public and private sector organisations to build data sharing syndicates which provide meaningful insights to support financial inclusion, customer identification, and the identification and prevention of financial crime and money laundering.

The company operates National SIRA, the UK’s largest syndicated database of cross-sector customer risk intelligence, and has run the National Fraud Initiative in partnership with the Cabinet Office since its inception.

When comparing the volume of recorded frauds or suspect applications for banking products during the last 12 months - compared to pre-pandemic ‘normal’ levels – Synectics Solutions has seen a significant increase in key areas.

Adverse filings for credit card applications have risen by around 34%, with the number of credit applications flagged as suspicious for ‘current address impersonation’ up 9% - marrying up with the idea that people may be supplying false details to gain access to much needed funds.

In Q3 of this year alone, Synectics’ data analysis shows the number of requests for basic bank accounts rejected due to ‘suspicion of receiving fraudulent or disputed funds’ is more than 5 times levels recorded pre-COVID.

“Financial vulnerability is tipping into new territory” added Russell. “For our part, we are working with banks and other financial services providers to help establish early warning systems of behavioural change, hopefully to help prevent people from heading down paths that would be tough to return from, and with organisations such as the Vulnerability Registration Service (VRS) to ensure risk identification processes adopted by the industry do not hinder those who need access to things like bank accounts and credit the most. But this is certainly an issue that requires cross-industry collaboration to address.”

One organisation already taking such collaborative steps is UK building society, The Nottingham. As well as working with peers and partners within the financial service sector to tackle industry wide issues, the organisation has also joined forces with the police and youth charity the Wolfpack Project, to run activities including money mule awareness sessions for young people.

Nick Angrave, Financial Crime Manager at The Nottingham commented: “The offer to earn cash by acting as a money mule or obtaining credit by falsifying information can seem like a lifeline for people desperate to cover rising costs of living. It really isn’t and we’re doing what we can to highlight that.”

“It’s a worrying sign of current pressures that people will consider carrying out an act that could lead to them having problems accessing credit, opening a bank account, or even taking on a mobile phone contract in the future. An act that could even result in a criminal record. Criminals recruiting money mules don’t care about those potential outcomes, they simply play on vulnerability and only see victims as a way to earn some fast cash in desperate times.”

[1] All figures, unless otherwise stated, are from YouGov Plc.  Total sample size was 2098 adults. Fieldwork was undertaken between 4th - 5th October 2022.  The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).