Marqeta, the modern global card issuance platform, today released new data from a survey of European consumers on their attitudes and experiences with lending. The findings, which will be detailed in an upcoming Future of Credit report, show that many consumers still feel left out of the credit bubble, held back by outdated loan criteria and assessments, such as credit scores. Yet a shift could be on the horizon, with 59% of European consumers saying they are more aware of new loan options due to the pandemic, with 61% more willing to use them.
The survey of 2,000 European consumers, conducted by Propeller Insights on behalf of Marqeta, found that 32% said they had been turned down for a loan because of their credit rating or financial capability. However, 59% of those turned down felt the decision was unfair, while 79% thought they could have gotten the loan if other factors had been taken into account. Regarding, 33% of respondents who had encountered difficulties obtaining credit said that being refused a traditional loan had forced them to turn to more expensive options, such as a payday loan. Unsurprisingly, most respondents (78%) noted that there must be a smarter way to rate loans than credit scores and 72% said credit scores don’t reflect whether they are able to pay or not.
Anna Porra, Director of European Strategy at Marqeta comments: “With the rising cost of living and many people struggling, it is essential to provide access to finance to those who need it. Yet the current lending system often penalizes people, which is a sign that things are broken. It’s crazy that someone living modestly, paying rent and saving for the future is often lumped into the same box as someone living beyond their means who doesn’t have a mortgage or other financial commitments – the two are not the same. With an open bank and wider access to rich data, there are so many different factors that can help determine if someone can afford something. New Lending Alternatives have done a great job of capitalizing on this to help give people more choice, but clearly more education is needed to help people better understand their options.
Looking at alternative funding avenues, it was clear that awareness is growing and people are selecting vendors for very specific benefits. For flexible payment card users, flexible payment options were the main benefit they gained, while the main reason for those using Buy Now, Pay Later was that it helped them better manage their finances. Open banking users said the main benefit was that it was easier for them to get credit. This indicates that the sector is moving towards a more flexible and inclusive lending model, better suited to specific needs and outcomes.
More generally, the data indicates that many consumers expect more from their lenders to enable greater control, personalization and rewards:
• 76% of respondents agree that lenders should offer “no default bonuses” for good repayment records
• 67% of respondents want a more engaging and less transactional relationship with their lender
• 61% of respondents want funds issued to a dedicated Visa or Mastercard to better track spending, as well as real-time guidance on financial behavior
• 69% of respondents are open to pre-agreed spending controls if it means more competitive rates
• 71% of respondents like the idea of a Visa or Mastercard that offers personalized rewards from specific merchants
Porra concludes: “While traditional banks remain popular, interest in digital propositions is growing. The winners of the future could be organizations that can very clearly understand their customers, their consumption habits and their level of accessibility. By knowing their customers better, lenders can make better decisions while reducing risk. Cards offer an opportunity for banks to modernize and for fintechs to increase their market share, as they provide real-time information that enables fair results for borrowers and lenders. Consumers want a better, more informed borrower experience – cards are well positioned to help meet those expectations. »