As a business, we can see the effects that the cultural climate and global events are having on people's financial situations and spending habits.
When we conducted research for our Advice Gap Report earlier this year, we learned the nation’s finances were in a precarious position before the prolonged effects of COVID. With the change in millions of people's financial situations, an increase in online shopping habits due to lockdown, and Christmas just around the corner, there’s a serious worry that more people than ever will be turning to Buy Now Pay Later (BNPL) services like Klarna, Clearpay and Afterpay.
We believe consumers are being continuously lured into gift-wrapped debt traps as a result of a lack of regulation around these increasingly popular services, that are celebrated by brands online, and irresponsibly encouraged by influencers on social media.
Our co-founder, Anthony Morrow, launched OpenMoney to change the financial service industry for the better by offering the accessible, affordable advice and direction consumers need to move forward with their finances, and to empower consumers to make more informed decisions about services just like BNPL.
As a result of always putting the consumer first and being pretty vocal about his views, Anthony was awarded the Consumer Champion of the Year Award at the 2020 MoneyAge Awards. We caught up with him for a virtual chat about his views on consumer debt and Buy Now Pay Later schemes, his personal mission, and how he sees us here at OpenMoney making a difference.
OpenMoney: Congratulations on your big win, we’re all really proud of you! What does winning this award mean to you?
Anthony Morrow: I think, as with most awards, it’s always great to have your work or efforts recognised but they aren’t the reason that we do what we do at OpenMoney. There are so many great businesses and people out there trying to improve outcomes for customers, it’s simply flattering to be considered one of them.
OM: Our research has shown that 40% of people asked, are worried about how they’ll afford Christmas this year, and over 50% feel pressured to spend more because it’s been a tough year. Do you think schemes such as BNPL are taking advantage of the situation?
AM: I’m not a fan of BNPL because I think they are focused on the worst parts of customer manipulation – material aspiration and fear of missing out. These are powerful devices to use when convincing people to spend money they don’t have. As we’ve seen over last couple of decades, and the rise in short-term debt, it causes lots of problems for people. These schemes were bad news before the pandemic and now they just feel dangerously inappropriate.
OM: How important is education when it comes to avoiding these services and money issues in general?
AM: Whilst greater understanding and education would be brilliant, sadly we are at a place where financial literacy is at really low levels. Solving this is not going to happen overnight and will take generations to put right. There are always plenty of words saying that personal finance should feature on the school curriculum. What would be much better, and far more easily achieved, is if those industries could behave in a way that reflected their concerns around literacy levels!
There are too many examples where products and services are developed where the customer takes full responsibility for making informed choices which, everyone knows, is a nonsense state of affairs. This is just companies passing risk to the customer, who they acknowledge have low levels of financial understanding, whilst retaining the profit.
Remember that the debt industry will spend billions of pounds a year advertising their products in very sophisticated ways, with increasingly granular data; it is no contest really.
OM: How do you see OpenMoney making a difference?
AM: OpenMoney was set up specifically to address this problem, and that people with little money have few options on where to go if they want advice on what to do with their money. We think financial advice can not only provide better future outcomes for customers but more importantly, prevent bad decisions being made. These bad decisions can lead to terrible outcomes that can affect a person's life for years. If we can help more people avoid these problems, that would be a big success for us.
OM: What would be your one key piece of advice to the 75% of people we asked, who will be using credit cards, store cards and BNPL schemes to pay for Christmas?
AM: It’s so important to be very clear how any debt you take on is going to be paid, no matter how tempting it is to get that item you really want after what has been a shocking year. Understand how much you’re really paying for the item as well, because interest can mean spending far more than you think especially on short-term loans and credit cards.
Our advice would always be to save up and buy that item without using debt. Not only will it save you money that you can put towards something else, but you will feel much better having actually done it. Set yourself goals – small or large – and stick to them. Bask in that smug feeling that you’ve achieved your goals and that you did so without the worry of owing someone money.
OM: And finally… do you have a few words for BNPL schemes? (Words that we can publish please!)
AM: Don’t follow the paths of credit card companies, peer-to-peer or payday lenders, and chase inappropriate customers for the sake of growth targets. All of these industries had genuine positive use cases for the few, but ended up targeting the many which has not got themselves into trouble, but millions of customers as well. We have record levels of personal debt in this country heading into an unprecedented period of uncertainty – don’t make people's lives worse by tempting them with expensive and targeted campaigns.
We're launching our #YouOnlyPayOnce (#YOPO) campaign to tackle Buy Now Pay Later schemes. We want to help protect consumers and empower them to make more informed decisions about what's being described as ‘gateway debt'.
You can read more on our #YOPO campaign here. Keep your eyes peeled for us taking on the services that we feel play an instrumental part in the consumer debt problem in the UK.