Ricky Knox, CEO and founder of Tandem Bank reflects on Covid-19’s impact on customers financial health and gives FinextraTV his take on shifting attitudes towards credit, pre and post-pandemic.
While many are concerned about the impact of Covid-19 on their personal finances following redundancies, furloughs and pay cuts, Knox points out that since the start of the lockdown, a large percentage of Tandem’s customers have in fact doubled their savings month on month.
Acknowledging the variety of financial situations that their customers may have, Tandem Bank has joined the industry in protecting those financially impacted by Covid-19 with ‘Personal Plans’.
“Our view is that customers are in very different circumstances at the moment and we are offering forbearance to anybody who wants it” Knox says. “But at a time like this, you shouldn’t be ceasing all your payments.”
He observes that other providers are ceasing customer payments, but are still accruing interest on their overall loan, potentially creating further debt down the line.
“[This is] doubly bad because what is actually going to happen is you’ve got a lot more to pay back in the future.”
Tandem is encouraging customers to continue to make small payments each month, and in return cancel all interest on their customers cards.
Knox reminds FinextraTV that in the last 3 months, the UK government has encouraged the public to take on credit and urged banks to lend more, especially to SMEs, in order to keep the economy afloat during the crisis.
“The amount of credit that has been extended to the UK economy, even in Q1 before the pandemic, was about £3 billion, which is the highest quarterly credit extension we have seen.” He goes onto say: “We had £4 billion in the first few weeks and now at £27 billion on credit schemes, which are unprecedented numbers.”
Knox believes that the pressure to borrow has created a dichotomy among millennials who before the pandemic, were increasingly moving away from credit, demonstrating its increasing unpopularity.
This change in behaviour was picked up by banks that made changes to their products such as Tandem’s ‘credit card’ being re-labeled ‘The Travel Money Cash Back Card’, which Knox admits is a comeback to traditional credit cards becoming a ‘turn off.’
“Those who lived through the financial crisis and watched their parents struggling with money are more likely to have a negative attitude towards credit,” Knox says.
In addition to this, Tandem has presented its customers with a current account that allows room for a progressive credit mechanism.
“Whether that’s through time shifting of individual bills and payments, or indeed your salary on a temporary basis that helps people through tougher times.”
Together, new products and customer plans help us move away from the unhealthy paradigms we have with credit, such as the overdraft amongst younger generations. Thus,enabling both saving and credit to be flexible and temporary, allowing customers smooth out their financial year.
“It’s about making sure the money is there at the right time for your cash flow,” he concludes. “This is important as we enter a time where customers who were previously put off by credit before the pandemic, may well need to borrow in the following months after the crisis.”