Personal Debt Soars as Cost of Living Crisis Bites

During the unprecedented cost of living crisis, the increasing reliance on credit has been brought to the forefront. A new report has exposed the reality of debt levels for millions of people across the UK and Europe. It is a stark reminder of the financial challenges and the changing behaviour patterns among consumers.

Key Points:

  • The cost of living crisis has led to soaring debt levels among adults in the UK and Europe.
  • There’s been a marked shift towards digital banking services, especially among the young population.
  • The UK showcases a notable drop in cash usage compared to its European counterparts.
  • There is a growing acceptance among young adults towards sharing personal financial data for enhanced financial management.
  • A third of Brits anticipate their financial situation to worsen over the next year.

Debt Crisis in Europe

CRIF, Europe’s top provider of digital transformation services, conducted a comprehensive survey that provides an insightful glimpse into the mounting credit dependency. The analysis covered major European markets, including Austria, France, Germany, Italy, Spain, and the UK.

According to the report, nearly one in four Europeans (23%) admitted that the cost of living crisis has elevated their debt levels to an all-time high. Delving into UK-specific data, both young (18-34) and middle-aged adults (35-54) have seen a similar surge in personal debt levels, with 26% and 23% respectively acknowledging the increase. This growing debt crisis seems to have normalized borrowing, with one-fifth (20%) of young and middle-aged UK adults resorting to borrowing as a means to manage their day-to-day expenses.

Age GroupPercentage with Increased Debt

Financial Management Challenges

Half of the UK population (49%) admits that managing income and spending amidst the crisis has become increasingly difficult, marginally higher than the European average of 46%. Furthermore, around 30% of UK consumers, on par with their German counterparts, anticipate their financial conditions to deteriorate in the upcoming year. This figure manifests the highest level of financial pessimism and across Europe.

Changes in Money Management

As the financial squeeze tightens, people have had to adapt to new ways of managing their money to avoid damaging their credit scores. Interestingly, while 19% of Europeans have increased their cash usage, the UK bucks the trend, with only 12% of its residents relying more on cash during these testing times.

CountryPercentage Increased Cash Usage

Adoption of Digital Banking Services

One silver lining to this financial cloud is the heightened adoption of digital banking services, particularly among young adults. Europe witnessed more than half (56%) of its young adults shifting to online or app-based financial management, a trend expected to persist beyond the crisis.

The trend is similar in the UK with the following breakdown:

Digital ActivityPercentage of Young Adults
Using digital and app-based banking more than they previously did51%
Utilising digital tools to help build up savings in the future46%
Connecting third-party apps to banking services to gain financial insights42%
Two people researching online

Growing Comfort with Data Sharing

Significantly, more than four in ten (45%) young Brits expressed their willingness to share more of their financial data, such as via open banking, if it aids in tracking spending, saving more easily, and assisting with credit or loan applications.

This shifting attitude towards sharing personal financial data, as long as the benefits are clearly communicated, highlights the increasing significance of robust digital services for banks in the UK and Europe.

Sara Costantini, Regional Director for the UK & Ireland at CRIF said: “Across Europe, the rising cost of living is having a severe impact on people’s personal finances.

“With many facing higher levels of debt than they’ve ever experienced before, Europeans are embracing innovations in digital banking to better understand and manage their finances, with younger adults in the UK among those leading the way. 

“This shift isn’t just a flash in the pan; the adoption of digital services is set to endure beyond the current crisis. If banks and lenders want to remain competitive, they need to ensure that their own digital services provide people with the insights, analysis and level of service they’ve come to expect.”

These findings are a part of CRIF’s “Banking on Banks” report, investigating how the prevailing economic challenges are reshaping European consumers’ attitudes and expectations from financial service providers. This report builds upon the 2022’s research, which revealed that UK residents are nearly twice as likely as other Europeans to prefer applying for financial products and services online, rather than in-person.

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