In 2023, understanding consumer finances is more important than ever

Unless you have been living under a rock for the past 6 months (not a bad option, in fairness), you will be well aware that the cost of living crisis is having a real impact on individuals and families not just in the UK, but around the globe.

A perfect storm of economic downturn and spiralling inflation has left more people than ever before at risk of falling into financial difficulty. In fact of the 89% of UK adults reporting a rise in the cost of living, 60% are spending less on non-essentials and 52% are going so far as using less energy at home. And of course for many, the economic shocks we have been through recently have led to a far more severe change in circumstances.

At the same time, the increasing use of buy-now-pay-later (BNPL) services, on top of more traditional forms of debt, can make it harder than ever both for consumers to understand their true financial situation, and for the businesses they deal with to do the same. But of course, it has never been more important than ever - for all the same reasons. 

This doesn’t only apply to the gambling sector, of course. The UK government has already made clear that it expects any provider of financial services to take additional steps to protect vulnerable customers. Similarly, those making lending decisions must be more careful than ever before. Organisations that in some circumstances assess customer finances - letting agencies or institutional landlords are a classic example - are likely to do so more often than previously.

And of course, at the really sharp end of this landscape, debt consolidation companies and lawyers or accountants dealing in bankruptcy or insolvency are going to be busier than ever. All these organisations need an effective way to check customer finances.

Isn’t that what credit checks are for?

Well, yes and no. Credit checks, and the credit data they are based upon, can certainly give many good insights into an individual’s financial situation. But they have four critical drawbacks in situations such as these:

• They are a lagging indicator - which is additionally problematic in an environment in which things are changing quickly
• They don’t really provide proper financial information. It isn’t possible to understand someone’s disposable income or salary on the back of a credit check, for example
• They can be heavily influenced by things that may not in fact be particularly important. One missed credit payment years ago might be of interest to a lender, but should it influence a business looking to let an apartment today?
• For many individuals, particularly those without a significant credit history, there simply isn’t enough data to really produce an accurate reading

In other words, when it really matters, credit checks aren’t necessarily going to be enough to assess a customer’s financial situation. Nor, for that matter, are some of the other usual suspects such as geo-affordability checks and ONS data. What is required is an up-to-the-minute view of an individual’s finance, that can show at a glance key indicators such as:

• Salary
• Disposable income
• Savings / balance
• Red flags such as existing short-term loans or high gambling spend
• And indeed anything that might want to be considered

The truth is that this information only really comes from a customer’s banking data. That’s why it is increasingly common to be asked to supply a bank statement when renting a property, for example. But it takes a lot of time and effort to read a conventional bank statement, and longer again to perform the calculations required to assess disposable income, or to accurately and consistently spot ‘red flag’ transactions. 

As noted above, ever more businesses, in ever more verticals, are now required to do this work. And making the task as simple as possible was the reason we founded ClearStake. 

How ClearStake helps

The ClearStake platform provides a fast, easy way to get the information you need from a bank statement. 

The emphasis on ‘easy’ is deliberate. For many businesses - think a small or medium legal or accountancy firm - it isn’t necessary or desirable to build a complex integration or have entire teams looking at bank statements. At its simplest, a user can simply log in to our platform, upload a PDF statement, and immediately access the numbers they need in a straightforward report (don’t worry, if you want a full integration built on Open Banking we can do that too…)

The phrase ‘the numbers they need’ is also significant. We don’t simply provide data, we allow each customer to configure the platform so they see RAG scoring that reflects their own criteria. In other words, you see at a glance whether the decision for any given customer is ‘yes’, ‘no’, or if you need to look closer. 

Whilst other document scanning solutions only export to CSV or Excel we go all the way to a final decision. From collecting the statement to a decision in ClearStake takes less than a minute. And unlike humans, we don’t make mistakes or fail to spot things.

For businesses large and small, ClearStake is able to provide the information you need, whenever you need to look deeper into a customer’s finances. It’s incredibly easy to get started, just drop us a line and we’ll be in touch.