“There’s room at the top they still tell you / if you want to be like the people on the ground / a working class hero is something to be.”
John Lennon sang it in 1970, but the Beatles’ lament is as relevant as ever today, with UK inflation peaking at 22.4% in 2023 (a near post-war record when it hit 24.5%) and consumer prices 10 .1% higher in July 2022 than twelve months before. The cost of living crisis is affecting far from just Britain, but people all over the world, with the United Nations Development Program reporting that high food and energy prices have pushed an additional 71 million people into poverty in just three months.
A working class hero is a very grim thing to be right now, I’m sure John Lennon would agree.
Of course, Covid-19-related supply chain disruptions had already begun to affect the global economy, and growth was already expected to “decelerate markedly from 5.5% in 2021 to 4.1% in 2022 and 3.2% in 2023,” but the war in Ukraine resulted in a 166.8% increase in the cost of natural gas over twelve months, and is also “responsible for almost 40% of the annual increase in the price of wheat and for 60-75% of the annual increase in the price of corn and sunflower seed oil.” The increased demand for goods and services as the world emerged from two years of pandemic life also overwhelmed global supply, which in turn caused shortages and rising prices. Wage growth will also “slow to about 4.5% on an annual basis by the end of 2022 and will likely fall below 4% next year,” reports Goldman Sachs.
This affects countries in Latin America, Central and South Asia and sub-Saharan Africa the most, but also people in the most developed countries in the world. In fact, a World Economic Forum poll found that “1 in 4 people struggled financially in 11 developed countries” and that “in the UK, as many as 1 in 7 adults now say they cannot afford to eat every day.” This is a staggering and heartbreaking figure, especially in such a prosperous country, and in such historically advanced times.
People are understandably scared, and unsure of how best to deal with it. When coping is at all possible, it seems that more and more people may be reversing the trend of the past five to 10 years and returning to using cash: a recent report saw the UK Post Office handling “£801m in personal cash withdrawals in July , the most since registrations began five years ago (and) up more than 20% from a year earlier.”
We may want to put the battle for money on hold, as fintech solutions may be better equipped to deal with this problem and ultimately more beneficial to struggling consumers as a whole.
A diverse range of solutions including loans, credit cards and buy-now-pay-later schemes are all available and readily available in the market today. These provide greater purchasing power and personal support in emergencies, so they are extremely well suited to the precarious times we live through. When you consider that less than 20% of BNPL users have missed a payment, that’s an incredibly promising number. And while it’s not advisable to rely solely on credit cards, or to rely on them for too long, they’re there precisely to help people cope in the event they can’t pay upfront – people shouldn’t be ashamed of needing credit, and 0% APR cards with interest-free periods on new purchases are a great place to start.
In these difficult times, people should use fintech solutions to improve their finances, for example by taking advantage of features such as cost analysis and reports, also widely available through a variety of money management and budgeting services. Only by analyzing patterns and figure-by-figure costs can we really come to a greater understanding of how to manage debt or make informed decisions about spending. This can help anyone feel more in control of their spending and, in turn, their financial well-being as a whole.
Of course, fintech companies also have the great responsibility of helping to educate and care for those hardest hit by the cost of living crisis. Any financial solution or strategy can lead to dangerous and unintended consequences if executed carelessly, which can be especially devastating in such an incredibly fragile economic climate. It should be up to everyone, including fintech companies and perhaps starting with any key player in the financial sector, to do their part.
