In this edition of The Briefing from Informed Choice on Wednesday 28th February 2018 – retailers on the brink, sharing banking transaction data, new rules for credit card market, pressure eases on retailers, and out of touch consumers.
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Retailers on the brink
Two of Britain’s best known retailers are on the brink of collapse, with more than 5,000 jobs at risk. Toys R Us and Maplin have reportedly placed administrators on standby after efforts to secure a rescue deal failed.
Consumer electronics chain Maplin, which is owned by Rutland Partners, was up for sale but a buyer has not been found. Toys R Us was also seeking a possible sale, in order to pay a £15m VAT bill.
Maplin has 200 stores and 2,500 staff in the UK. Toys R Us has 3,000 staff across its 106 UK stores.
Sharing banking transaction data
One in two UK consumers would be happy to share transaction data with third parties if offered a more personalised service, whilst one in three would be happy to use banking services from technology companies, because of the personalisation they offer. This is according to a new study from relationship marketing platform Optimove.
UK Banks that missed last month’s Open Banking deadline are facing up to the end of their extension period. Next week sees HSBC and Nationwide’s deadline to implement compliant payments functionality. Until now, established financial services providers have been able to rely on large, mostly static customer bases. But once Open Banking gets into full swing, customers will be able to permit third-party access to their accounts and financial data, allowing tech companies to offer direct financial services, and giving increased visibility to consumers.
Pini Yakuel, CEO of relationship marketing platform Optimove, comments:
Banks and financial services providers will have to focus on giving the best possible value to the customer, to stop them switching to their competitors. Offering highly tailored communications will be key to this. Financial services firms will be looking at their existing data to find out what value means to each person, and adapting marketing strategies in an emotionally-intelligent way to make every customer feel special.
Consumers are likely to see an increasingly personalised experience, as old and new financial companies move to distinguish their brand with promotions and rewards tailored to each individual, like retailers.
New rules for credit card market
The Financial Conduct Authority (FCA) has published its final policy statement on new rules for the credit card market. The FCA estimates the changes will save consumers between £310 million and £1.3 billion a year in lower interest charges. The new rules come into force on 1st March 2018, but firms have until 1st September 2018 to comply. The changes will provide more protection for credit card customers in persistent debt or at risk of financial difficulties.
The changes are being introduced following a comprehensive study of the credit card market. The study analysed the accounts of 34 million credit card customers over a period of five years, and surveyed almost 40,000 consumers.
Christopher Woolard, Director of Strategy and Competition said:
These new rules will significantly reduce the numbers of customers with problem credit card debt. Credit cards offer customers flexibility to manage their finances and repayments, but with this there is a risk customers can build up and hold debt over a long period of time – without making much headway on the outstanding balance.
Under these new rules firms will have to help customers to break the cycle of persistent debt and ensure customers who cannot afford to repay more quickly, are given help.
Pressure eases on retailers
Shop price deflation increased to 0.8% in February, resulting in a fall in prices for 58 consecutive months. According to the British Retail Consortium, the February fall in prices compares with a 0.2% rate of deflation in January.
Non-food prices had deflation of 2.2% in February, increased from 1.9% in January. According to the BRC, the figures suggests a recovery following a collapse in the value of Pound Sterling in June 2016, following the Brexit vote. They also noted that tough times lie ahead for many retailers.
Helen Dickinson, chief executive of the BRC, said:
This is a further sign that we have passed the peak of the upward pressure on inflation caused by the fall in the pound in June 2016.
This will ease the squeeze on consumer incomes over the coming year, but it’s likely to do little to lift the rate of growth in consumption. Earnings are still falling in real terms, despite wages increasing, and savings are unlikely to provide the same support to spending that they have over the last 18 months.
Out of touch consumers
The average Brit is out of touch about the price of everyday goods, according to a new study by credit report provider Noddle. The survey found the average Briton could roughly price only three out of 10 everyday purchases, from a list including a loaf of bread, a tin of beans and a dozen eggs.
Those who regularly use contactless payments were found to be worse at estimating costs for six out of 10 items. The report also found a lack of budgeting, with only 24% setting a weekly or monthly budget and four in 10 people relying on credit cards to pay for groceries on a daily or weekly basis.
Jacqueline Dewey, Managing Director at Noddle.co.uk said:
It’s really important to keep a close eye on all spending, no matter how big or small. Good money management through regular budgeting is proven to help in the long term, whether you’re well off or trying to save.
Having to resort to credit cards or overdrafts to make ends meet can be bad news for your credit score. If you’re not able to keep up with repayments on the credit you use, your credit score could take a hit, meaning it may be harder to get credit when you really need it for bigger items like a car or a mortgage.
Everyday spending can start to mount up if you’re not careful, but keeping an eye on your incomings and outgoings is one of the best things you can do for your credit score – and your bank balance!
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