Interest rates – rollercoaster

from RO-AR.com ...

Having had a complete switch off, for a week off – I am getting back in the swing of things this morning and catching up.

Obviously, the debt packager restrictions have been a headline, as have the rumbling noises of increasing interest rates and potential impact on the housing market (house prices seem to be up there with the state of the NHS and price of a pint of beer in the national psyche, so expect this to go on for a bit longer too… )

But, the following article caught my eye this morning… Interest rate caps in some US states at 36%…

A maximum interest rate cap?

In Europe there are already maximum interest rate restrictions for consumer lending in some markets… nearby examples include France at around 21.24% and Ireland at 48%.

In the UK we have generally decided to opt for a more complex set of regulations rather than a pure cap, with daily amounts, total repayments and fee limits.?

This being said, in the UK you can still find rates online commonly above 50-90% APR for sub-prime loans, above 25% for near prime and even prime credit cards at 21%.

Are changes to come?

With interest rates rising and inflation squeezing incomes you have to wonder if more changes are due here.?

This has been previously debated and would certainly change the dynamics in some areas of the credit market, impacting both general access to credit and the margins for lending businesses, many of whom are already squeezed by an increasing cost of funding…

With media noise around lenders/lending in general increasing, could this easily be seen politically as a popular, quick, easy target and change to offset the increasing cost of living? If the case it could be something we may have to react to.

What to do now?

At the moment, I would hasten to add, this is in the realms of complete speculation and conjecture… however I do like to be prepared, and much of this is good business practice in any case.

If there were changes, it would, of course, put pressure on the collections/receivables process yet again, intensifying focus before any effects for constricted lending start to flow through.

Making sure that these processes are efficient, effective, with a demonstratable duty of care towards consumers and borrowers is important today… it would be critical should this happen…

And, as we learnt from the pandemic, getting ahead of the curve, being ready and flexible makes all the difference in how easily you can respond to handle the change.

There are of course many ways to review your processs, be it from full process/customer journey reviews to looking at resources online at lower price points… it all helps to compare vs peers and get ideas. (drop me a note if you would like some pointers for these too).

However, although the UK is a leader in many areas (especially consumer treatment), there is also an opportunity to learn from other markets.

Many of these are already managing under these restrictions already and by listening to peers elsewhere, and sharing experience, we can also get better…

So maybe it is time to get out the travelling shoes and get out there a little more too…. something to also ponder this summer.

And what was I up to on vacation….?

Having not been on a rollercoaster for 30 years (like a fool…) I ventured to Blackpool to try the latest ones out.?

I am afraid of heights and no one will believe me when I say I was more scared on the stairs… honestly.

Anyhow the picture tells the complete story really – complete terror

… sometimes you just have to be brave and throw yourself into things…

Have a good week everyone.

20 Headlines from last week

1. Rising Food Prices Impacting Living Standards: Food prices have increased by 19% in April, contributing to inflation and causing concern for families.
2. Businesses Shifting Focus from Growth to Cost-Cutting: Over 60% of UK businesses are prioritizing cost-cutting strategies due to rising inflation and interest rates.
3. Fuel Poverty Continues to Affect 6.6 Million Households: A significant number of households, approximately 6.6 million, remain trapped in fuel poverty.
4. Consumers Face Soaring Energy Bills: Energy bills have risen by 80% compared to pre-crisis levels, creating financial pressure for consumers.
5. Banks Criticized for Offering Meager Savings Rates: High street banks are shortchanging customers with lower savings rates compared to challenger banks.
6. UK's Poorest Children Lack Financial Education: Children from disadvantaged backgrounds have limited exposure to financial education, requiring targeted interventions.
7. Personalization Essential as Customer Loyalty Declines: Amid the COVID-19 pandemic, customer loyalty towards stores and products has diminished, emphasizing the need for personalization strategies.
8. Card Fraud in Europe Witnesses Significant Decline: European Central Bank reports a notable reduction in card fraud cases compared to previous years.
9. Physical Channels Still Preferred by One-Third of UK Banking Customers: Despite a digital shift, a considerable number of banking customers prefer physical interactions for their transactions.
10. Revolut Surpasses 30 Million Customers Worldwide: Revolut, the global financial super app, achieves a milestone of 30 million retail customers and handles over 400 million transactions per month.
11. Digital Prepaid Card Usage Predicted to Surge by 650%: The number of digitally issued prepaid cards is projected to exceed 940 million by 2028, signifying a substantial increase.
12. FCA Bans Referral Fees for Debt Packager Firms: Debt packagers are prohibited from earning referral fees to prevent manipulative practices and protect consumers.
13. Intrum UK Expands Services Through Acquisitions: Intrum UK acquires Capquest and Mars UK platforms from Arrow Global, broadening its service offerings.
14. Ban on IVA Referral Fees Implemented to Safeguard Consumers: Referral fees for Individual Voluntary Arrangements (IVA) are banned to prevent firms from pushing inappropriate debt solutions.
15. AI Enhances Questioning Skills and Problem Solving: Artificial intelligence technology complements critical thinking, innovation, and problem-solving abilities, fostering better outcomes.
16. Navigating the AI Hype Cycle to Drive Practical ML Projects: Distinguishing between practical machine learning (ML) projects and research-driven advancements is crucial to avoid distraction and focus on impactful applications.
17. UK Homes Among World's Smallest but Most Expensive: Property sizes in the UK are relatively small compared to other countries, while prices remain high.
18. Awareness Gap: Customers Uninformed About Water Company Support: Only 30% of customers are aware of the financial assistance provided by water companies.
19. Understanding the Significance of Personalization: McKinsey highlights the importance of personalization strategies in enhancing customer engagement and loyalty.
20. Inflationary Pressures Persist Amid Easing Overall Inflation: Despite a decrease in overall inflation, food prices continue to rise, affecting living standards and adding to financial challenges.