With the market for both new cars and used cars ever growing, we are spoilt for choice. Many people, however, have their eyes set on a particular model. Going after your dream car can be an expensive endeavour, but the feeling of driving off the forecourt in your dream car is like no other. Join us to find out how you can afford the car of your dreams without breaking the bank.

Option 1: Credit card

Before going down this route, make sure you speak to your car dealer first as some dealerships do not accept credit card payments.

A benefit of credit card purchases is that your credit card company can give you added protection on the full purchase cost (often as long as the value of the vehicle is over £100 and less than £30,000). Of course, you have to be able to meet your monthly payments too.

If you buy a car in this way, you’ll be allowed to put down an even lower deposit than 10% and pay the remaining money off using a debit card. It’s best to consider all options here, as often the interest that you pay on a credit card could be significantly higher than that of a finance agreement.

Option 2: Hire purchase agreement

This method involves monthly payments with the option to purchase the car at the end of your agreement based on its new value.

The standard deposit to pay when purchasing in this way is 10%, but it is always an option to pay more and have less to pay off later. The rest of the car is then payed off in instalments over a period of one to five years. The longer this period, the less you have to pay each month but due to interest charges, the total cost of the car becomes higher.

Option 3: Personal Contract Purchase agreement

This option is quite similar to opting for a hire purchase agreement. In this scenario, the end value of the car is agreed at the start of the contract, so you can plan your payments accordingly. Payments are often less than what you’d pay in a hire purchase agreement as you pay the full price of the car, plus interest but minus the guaranteed future value of the car. You must pass credit checks before you’re eligible for a PCP agreement.

If you can afford it, it’s a good idea to put down a larger deposit, therefore lessening the amount you have to pay back monthly. Saving a lump sum for a large deposit is easier than saving up for a car, while reduced monthly payments can really help out too. Always evaluate your current monthly payments before you agree to a finance agreement, as being behind on your payments can lead to financial issues.

At the conclusion of your PCP agreement you have two options. You can either pay off the future value of the car to become the full owner, hand back the keys or trade the car in as a deposit for a new finance agreement.

One thing you must be aware of with this agreement is the danger of exceeding the forecasted mileage. If you exceed the mileage on the car, there will be further charges to pay. This is because more miles decrease the value of the car. Also, any damage to the car will be charged to you, so you must be prepared to take good care of the vehicle.

Considering all the options, your dream car isn’t as far out of your grasp as you might have thought. As we can see, there are a range of finance options available to you for purchasing new cars — allowing you to drive that dream car you’ve always wanted without forking out loads of cash. Save up what you can for a significant deposit and always make sure that you can cover the payments before signing any agreements.

A good credit score provides you with so many benefits, such as reasonable interest rates, faster loan approvals, and suitable insurance policies. Nearly 70 million Americans are suffering from bad credit because repairing your credit requires a lot of time and self-control. So, what is the best way to improve your credit score in no time? The answer is simple – buy a tradeline.

But, in order to understand how to improve your credit score by using a tradeline, you need to understand the term “tradeline” first.

What are tradelines?

A tradeline is basically any account appearing on your credit report. A tradeline keeps a record of creditor’s information to calculate his credit report. You can mutually benefit from someone with positive credit history and improve your credit score if he adds you as an authorized user (AU).

Most people ask their family and friends to add them as their AU, but if you want a quick improvement to your credit score, you can add users with exceptional credit history as an authorized user. These AU provide positive data regarding:

• Payment History
• Amount owed
• Length of history

Fair Isaac Corporation (FICO) places a credit score in 5 different grades.

• 720-850 Excellent
• 660-719 Good
• 620-659 Average
• 580-619 Below Average
• 350-579 Poor

Buying 2-3 seasoned tradeline can help you jump to a 720-850 credit score in a month.

What will a tradeline help you achieve?

A tradeline helps you improve your credit score so it will reap all the benefits a good credit score enables you to achieve. Without a good credit score, you will have limited access and services of your credit card, loan plan, and a higher rate of mortgages. In short, you will have to end up paying more money than usual.

But good tradelines on your account will help you achieve a credit score of 750 or higher in no time. When you buy an authorized tradeline from someone like Personal Tradelines, you are added as an AU to one of their credit card accounts, and it takes only 25-30 days to get your credit up to a good score.

Common mistakes people make when buying Tradelines

·         Having no idea of how tradelines work

The most common mistake people do is buy a tradeline without having the slightest idea of how it works. I recommend that you read all about tradelines and their types before actually committing to buying one. You can also get help and information from business tradelines vendors.

·         Buying tradelines in hopes that it will unfreeze their accounts

Tradelines work by adding positive information to your account. If you have fraud alerts or credit freezes on your account, buying a tradeline will not work as new information can’t be posted on your credit report.

·         Understanding the age factor of tradelines

The effectiveness of a tradeline is always going to be relative to how old your own account is and what is in your credit file. For example, if you have a 10-year-old account, an 8-year-old tradeline would not have much impact on it. However, if the account is only 1-2 years old, an 8-year-old tradeline would do wonders in increasing your credit score.

·         Not having an idea of how credit score works

Before buying tradelines, it is vital to know how a credit score impacts your general lifestyle. Because even if you are successful at getting a good credit score after buying tradelines; you will have to follow a particular set of rules to maintain it.

·         Going cheap

Some people go for 4-5 cheap tradelines instead of buying 2-3 seasoned tradelines. It ends up costing you more money, and you are better off buying seasoned or authorized tradelines rather than a lot of cheap tradelines.

Also, a cheap tradeline will not have that much positive effect on your credit report as they don’t have good age. This works against the goal of improving your credit score exponentially.

·         Buying tradelines for shady companies

Unfortunately, there are a lot of companies that are selling tradelines, and it is tough to trust someone random. It is essential to do a background check on a company which includes customer reviews, their ratings, and some money-back guarantee to make that you are getting the best service possible.

But when is it sensible to use a card and when to save? MoneySuperMarket data shows that the usage of credit cards seems to be growing, and have recently conducted a study to identify how much you’ll actually pay on average based on the size of the payments you’re making, the average monthly repayment possible, and the average interest involved as a result.

Alongside the credit card payments, the research highlights how long it would take to make each payment by saving up a monthly average of £352.31 (based on average earnings of £1,827.10 a month, and average expenditure of £1,474.79 a month) – so you can compare whether it’s a better option to save up or to use a card.

Spending and Saving Numbers Crunched

With the average person being able to save around £350 a month, there’s minimal difference in terms of time and total amount spent for a purchase under this amount – whether you’re saving or using a credit card. But the interest does take an effect at higher costs. On a credit card payment of £600, for example, you would on average pay £17 in interest, taking two months to pay it off. At £5,000, the interest reaches up to £931 over 17 months of repayment, against 14.2 months of saving with no interest.

Save for the Suit, Spend on the Commute

The research suggests that while you could save up for a bespoke suit in 2.7 months and save yourself £36 in credit card interest, for a train ticket you might be better off paying on your credit card – as you’ll still have to travel while saving, and the costs of individual tickets is likely to be higher than the £8 you would save in credit card interest.

Can a New Coat Improve Your Credit Rating?

Buying a winter coat on a credit card can be a sensible choice as lower payments that can be paid off immediately, without any interest, will contribute positively to your credit rating.

Even at higher costs, holidays can be a smart choice for a credit card. Despite the average £2,417 spend accruing as much as £208 in interest and taking just over two more months to pay off than to save up, credit cards can provide security on payments, meaning you’re better protected against problems with flights and hotels.

Save for Season Ticket, Spend on the Trainers

More affordable equipment like a mountain bike or sports trainers can be paid off quickly and improve your credit score without accruing any interest, but for a football season ticket, which you can plan to buy well in advance, there’s no significant advantage to buying on card. Instead of paying the additional £27 in interest over three months, you’re better off spending the average £794 after saving up for 2.3 months.

Smarter Smart Phone Buying

A high-end smart phone like the iPhone could cost nearly £50 in interest on a credit card, making saving up the better option. But for a cheap laptop, it might be much lower interest of around £15 or less – and many retailers offer finance options for smart phones and laptops, making it sensible to research your shopping before you buy.

Split the Costs When Getting Together

Weddings are expensive events – so it makes sense to split up the cost as much as possible. Saving up for purchases like the dress and photography, and putting the cheaper payments such as cake and groom’s outfit on credit card, may be the best way to minimise interest payments. Using a card to cover the venue can be helpful as well, as this can protect you against any last minute problems.

Top Tips from MoneySuperMarket

While the study provides some details of smart ways to use your credit cards, some of the top tips include:

• Only make applications for credit cards you think will be accepted or for which you're pre-accepted.
• Use "credit builder credit cards" to improve your credit score.
• Use a cashback card if you're able to pay off your card consistently.

It is essential that you improve your credit score prior to applying for a mortgage in order to boost your chances of getting one.

Here are a few ways that you can bump up your credit rating with the help from Howells Solicitors:

1. Pay Your Monthly Bills on Time

The first, and most obvious, point to make would be to start paying your bills on time, or in advance. This is one of the biggest contributing factors to getting a good credit rating. Paying your bills late will give your bank a reason to tell everyone that you’re not trustworthy enough to lend money to, and therefore bring your score down.

2. Pay Your Phone Bill

Again, not too far away from point one but your monthly phone bill contributes heavily to your credit score. While it may only be £20/30 a month, ensure that there is enough money in your bank to pay this.

Usually, network providers give you a few days’ notice if the payment does not go through as they are aware that there could be a number of contributing factors (closed bank, new bank, fraud, etc.), but you should realistically always leave enough money in your account to pay this by direct debit. The smoother the transaction goes, the higher the rating gets.

3. Use Your Credit Card

If you don’t have a credit card, then it might be worth getting one. If you make small purchases on your credit card and pay them back on time, or before the due date, it shows your bank that you’re reliable and can pay back things on time.

Think of it this way; would you be more likely to lend money to someone that has no history of paying things back, so you have no idea whether you’ll get the money back or not, or more likely to lend money to someone that you know has a great history of paying people back on time?

4. Sign-Up to Credit Updates

You should sign-up to a free credit report checker, such as Experian, which sends you monthly emails. This way, you will be made aware of any changes and can dispute any errors that have been made that reflects your credit in a bad light, however there is no need to run multiple, full credit checks

5. Close Unused Accounts

Closing any unused bank accounts can improve your credit score. If you opened a bank account back in the day, and you haven’t touched it since, then take the money out that is currently in there and close the account. If you have more than one credit card, then you should consolidate the debt on just one.

For further information on whether your credit score will affect your chances of getting a mortgage, or further information on how you can improve your credit score, check out this FAQ Series by Howells Solicitors, or contact the team for guidance using the contact form on their website.

Here Sarah Jackson, Director at Equiniti Credit Services, reveals some surprising stats about millennials’ attitudes to credit and explores with Finance Monthly what it all means for lenders targeting this demographic.

According to Equiniti Credit Service’s latest UK research report ‘A three part harmony: how regulation, data and CX are evolving consumer attitudes to credit’, despite millennial borrowing increasing annually by a healthy 8%, three fifths of this age group will still only consider borrowing from a traditional, well-established lender, or one that they had dealt with before.

That’s weird

Right. Particularly when it’s clear that alternative lending is gaining traction across other age groups and showing strong overall growth of 15% in 2018. The same report revealed that some 62% of all UK consumers would consider alternative sources of credit (I.e. a non-bank, such as a retailer or car finance provider) the next time they apply for a loan. While consideration does not equal action, the figures about take-up also support the trend: over a quarter of consumers who borrowed over £1000 in the last year did, in fact, use an alternative lender over a traditional high street bank.

If both millennial borrowing and alternative lending are on the up, why is there a disconnect between the two?

So, while non-traditional lenders are not yet competing with banks in loan volumes, they have certainly established themselves within the market. Which begs a question: if both millennial borrowing and alternative lending are on the up, why is there a disconnect between the two?

Customer inexperience

The story, as usual, lies in the data. Although 70% of UK consumers are comfortable completing loan application processes digitally, this figure drops to 57% for millennials specifically. Considering this age group’s well documented digital literacy, this can only be chalked up to financial inexperience. Older generations have not only had more time to become comfortable with the credit processes involved with a loan application, but most have also had more opportunity. External factors play a big part here too. House prices are such that for many millennials, unlike previous generations, the prospect of buying a house and applying for a mortgage at a relatively young age doesn’t even feature on the radar. As such, this group has less exposure to credit processes.

Financial inexperience creates a need for more careful guidance and reassurance. This likely explains why over half (58%) of millennials would only consider borrowing from well-known or previously used lenders.

A helping hand

For lenders, this is both a problem and a huge opportunity. With many millennials now in their mid-thirties, their collective buying power is set to increase substantially over the next decade, making this an increasingly lucrative target market.

That this knowledge gap exists is a chance for the smartest non-traditional credit providers to differentiate themselves as genuine and credible sources of information and guidance for these nervy borrowers.

A great user experience (UX) will undoubtedly help, but will need to be far more than a facility for fast and convenient access to credit.

A great user experience (UX) will undoubtedly help, but will need to be far more than a facility for fast and convenient access to credit. This notion is given further weight by the same report which indicates that one in seven applicants cite clarity of the product’s documentation as the most important factor when deciding between lenders. Persuasive and confidence inspiring UX goes far beyond origination – it must resonate throughout the entire loan lifecycle.

To successfully target millennials, this means balancing investment in a slick digital user interface and the development of clear and simple documentation. Since this group values one-to-one guidance, the contact centre will be a key battleground for business. Here, engaging a specialist outsourcing partner may well be the way to go. These providers are trained and skilled in supporting the kind of dialogue that younger generations need to confidently apply for credit.

Besides, sometimes you have to take a step backward to move forward. The most practical way of dealing with bankruptcy and moving back to solvency is by establishing a saving plan. Saving is an essential aspect of wealth creation. With the right mindset and correct information, individuals can create wealth post-bankruptcy by adopting and neglecting certain behaviors.

Take Advantage of the Pre-discharge Credit Counseling

Bankruptcy comes with a lot of emotional and psychological strain. However, getting help from credit counselors can help you get through. Involving your legal advisor will help you find an approved agency to counsel you through the process. The counseling platform offers valuable financial advice to help you wisely manage your finances in future. It also focuses on income, expenses and strategies to save. Consequently, it covers financial literacy on budgeting and debt management. Budgeting your finances is essential if you want to achieve your saving goals. During bankruptcy, individuals learn to live without credit. Therefore, this experience should be used to your advantage by trying to operate with no debt post-bankruptcy. In case you access credit-cards, it is essential that payments be made before or on dates when they are due. 

Increase Your Income Streams

After being declared bankrupt, sourcing for new income streams may be difficult at first. However, individuals can work with what they have, to achieve what they hope to get. For example, monthly income paid to unsecured creditors before being declared bankrupt can help you build up on your savings by depositing it into your savings account. Individuals can also start a business. Not all business ventures require capital to start. For example, Dave Ramsey began a financial advice group in his church after he was declared bankrupt which later became the successful Ramsey Show. Using your experience to educate others can create business opportunities for you, and you can even document your experience by writing a book. You can also take up a second job and save income from that job.

 Work on Improving Your Credit History

Although debt is the last thing, you should think about post-bankruptcy, working on developing a good credit history is essential. Bankruptcy records show on your credit score for up to seven years. However, improving your credit scores in three years could make you qualified for a loan. Lenders often look at payment history, hence having years of consistent payments to your savings account shows reliability and commitment. Consequently, a good credit history improves your credit score allowing you to qualify for loans with lower interest rates which also makes it easier for you to save.

Dealing with bankruptcy can be exhausting. However, accepting and working towards financial stability can make it bearable. Personal financial evaluation can help you know where to start on your journey towards normalcy. Adopting better financial habits like living within your means is also good to ensure you remain financially stable.

But what’s the difference between a financial analyst and a credit analyst? Below David Smith, a cryptographer from the Smart Card Institute, explains for Finance Monthly.

The job of a credit analyst differs from that of a financial analyst. But they have one thing in common; a prerequisite skill in research and analysis.

A credit analyst has his/her role anchored on credits alone. Basically, the credit analyst is responsible for the vetting of an applicants credit profile to ascertain if the applicant is eligible enough for a grant or loan. In cases where the applicant is not qualified to receive a loan based on his/her previous credit records, the credit analyst offers possible solutions and alternatives to the applicant.

According to masterfinance a credit analyst sources relevant information from files of the applicant relating to his/her credit records and financial habits. When all is verified, the credit analyst can then recommend the applicant to the office responsible for the issuance of loan. Though you can get free Equifax reports for detailed business credit reports.

Credit analysts can work in the bank, credit card issuing companies (This is not to be misconstrued with the credit card manufacturers who make use of magnetic stripes in the process. Credit analyst are not into digital hardware but more into finances of a complex nature), credit rating agencies, investment companies and any other financial institution in need of their analytical prowess.

To become a credit analyst, one must need to have bagged a degree in finance, accountancy, economics or related fields.

Financial analysts on the other hand are involved in a more versatile role when it comes to finances. They carry out researches on a broader level. These researches involves a critical survey into the macroeconomic and microeconomic environment around a potential business or sector which can assist the business or sector in making informed decisions on a planned financial step they are about to take.

For instance, if a company decides to make its shares in equity available for the public to come invest in, they will need a financial analyst to look at the possibilities involved in the proposed venture and pre-tell the outcome. This will enable the company make the right decisions.

They are also required most times to forecast the financial future of a business judging from certain parameters on ground. This calls for a more detailed research and results.

Financial analysts can work anywhere the traffic in finances is massive unlike the credit analysts. Financial analyst can fit into just any business space and help business owners make decisions from the backdrop of options and findings.

To become a financial analyst, one must obtain a degree in either math, accounting, economics, finance, business management or related fields. Other fields that are likely going to give one an edge in the hiring table are: computer science, physics and engineering. Becoming a chartered financial analyst is the peak of the qualifications followed by an MBA in same field. Companies generous enough can train their staff on financial management and analysis.

Martin Lewis, founder of moneysavingexpert.com says: “Everyone should take time to manage and boost their credit score. It's no longer just about whether you can get mortgages, credit cards and loans, it can also affect mobile phone contracts, monthly car insurance, bank accounts and more.”

However, what happens when applicants realise that their credit score is at the lower end of the rating scale?

How do you improve it and how long will this take?

First, what could be impacting your credit score?

Several factors impact credit scores, each contributing to the score credit reference agencies provide applicants.

Not being on the electoral roll

It's pretty easy to rectify if you are not on the electoral register - all you have to do is register with your local council. Lenders like when applicants have an address that confirms where they are. So if you are not on the register, do so as soon as possible.

Taking out too much credit at once

If applicants make several credit applications simultaneously, this does not look great to credit lenders, almost appearing as desperate, suggesting to lenders that you’re relying heavily on credit to manage your finances.

Using too much of your available credit

For some credit lenders, their preference is for borrowers to not use more than 25% of their total credit limit at any one time. For example, if an existing borrower has a credit limit of £2,000, they should not have more than a £500 spend on the account.

Borrowers who wish to improve their credit scores will need to repay some of the used credit limits to sit under the 25% spend. This is not an exact science as other factors still come in to play yet those who adopt this approach, will see their credit score rise.

Having too much available credit

This may sound weird, yet having lots of empty credit cards can adversely impact a score. Newer lenders worry that if they lend to you, you could still take on more credit with your other empty credit cards, thus making it riskier for you to repay them.

The point here is, do you need all that available credit? Keep the ones you use to spend and repay on time regularly, and ditch the ones you no longer use at all. Old balance transfer credit cards are an obvious target for closure.

Having the ‘wrong’ credit

Whilst this may be controversial, those with loans and credit from high-interest payday loan lenders like Wonga, or whopping interest-rate APRs on so-called credit builder credit cards could see their credit scores take a plummet. Lenders see these as the only credit you can receive rather than traditional borrowing like from a bank.

No or little credit history

Again, this may sound counter-productive, yet those who have lower scores are also those that have never used or only borrowed a long time ago. For lenders, this means that they have little credit history of you as a borrower - and thus whether you are actually able to repay in the present.

You will need to demonstrate that you can manage credit over a few months before seeing any improvement. A tip is to get a small balance credit card and pay it off each month.

Debt, Bankruptcy's & County Court Judgements

Debt, bankruptcy's and CCJs will linger on your credit report for six years. There is definitely no short-term fix here - the only option is to ensure that in these six years you remain debt-free and maintain an excellent financial position. Finally, this will be reflected in your credit score, yet it won't happen until the six years are up.

Being financially linked to another person

Being financially tied to someone – something that usually occurs when you share a financial account, like a joint saving or current account, or even a mortgage; will impact your credit score.

Sadly it is a fact, many couples separate or divorce, and if their score is terrible, this will still impact yours. The tip here is to contact each credit reference agency and ask for this link to be removed. Next time your credit report is refreshed - the link should be removed.

How long will my credit score take to improve?

Each bank, building society, online lender, local authority and other relevant organisations have their own timescales for updating credit reference agencies with the latest information. It could be several weeks before applicants notice any changes in their credit report.

Improving credit scores is about ensuring that you make smart choices about your financial situation, and having the determination to see it through.

So, first, check what is impacting your score, and then ensure that you update every credit reference agency. Sadly, there’s no overnight fix but having a good credit score is worth the effort and will set you up for a stable financial future.

72% of UK consumers are opting for better food choices in supermarkets while spending on health and fitness in the country is on the rise despite increasing pressure on income. A healthy lifestyle can improve your fitness, lower the risk of cardiovascular disease and even boost your mental health. However, can being health conscious help your wallet? Evidence says it can. Here are four ways healthy habits can impact your financial goals, including your plans for getting on the property ladder and your retirement future.

Better Food Decisions = Less Spending

Consumers in the UK spent over £49 billion on eating and drinking out in 2017. This equates to £1,000 per person. In fact, Brits spend more on lunch than utilities. However, healthier eating means savings on the food front. One tip for eating healthy is to choose a packed homecooked lunch where you are aware of all the ingredients and that it is free of preservatives. Doing this can add at least £245 to your bank balance each year. Shopping and cooking at home also saves money in the supermarket, further reducing your monthly food bills. The recommended diet is full of fruit, vegetables, and whole grains; all of which you can consumer for £3 a day. The cost of one meal out can be enough to provide food for 3 or more days.

Your Earning Capacity Improves

Living a healthier lifestyle improves productivity. Eating healthier foods increases your energy and leads to better sleep. A diet rich in whole foods including fruits, lean protein and vegetables will boost energy levels. Multiple studies have linked eating a nutritious breakfast to productivity levels throughout the day. Thanks to increasing convenience in the kitchen, fueling your body with healthy breakfast beverages or meals are now much easier. When you are feeling more rested, you are then able to concentrate and retain information better. All of these positive changes equates to better productivity in the workplace, boosting your earning potential.

It can also boost creativity; spurring ideas and motivation to launch side businesses and pursue other sources of income (and have the energy to keep up with them). This is part of the reasoning behind the growth of corporate wellness programs in workplaces today. Happier, healthier employees are good for business.

Living Healthy Improves Life Expectancy- And Your Credit

Some habits that are a part of living a healthier life include avoiding smoking, monitoring alcohol and sugar intake and exercising. All of these also impact your life expectancy. Living longer can not only mean saving on health insurance but also influence your approval for longer life mortgages, if needed. Longer term mortgages are proving to be a popular way to help people buy a home and also save up to £30,000 on their mortgage overall. Increasing the term of your home loan can decrease your chances of defaulting on payments, falling into debt, damaging your credit scores and simply making your bills more affordable.

Opting For A Healthier Lifestyle Could Protect Your Retirement Funds

The fear of outliving their retirement savings is very real for British consumers, particularly with the younger workforce. It is estimated that you will need to set aside at least £260,000 for their retirement needs in addition to their state pension. Financial firm Key Research puts basic living costs to be approximately £10,830 a year. However, the benefits of being health conscious means fewer healthcare bills, and lower health and life insurance premiums in retirement. Savings like these can be put back into your retirement funds.

Choosing to live a healthier lifestyle is about more than making the healthier choices. It is about improving your present and protecting your future. Better health means a better standard of life, including financially.

Intertrust, a global leader in providing expert administrative services to clients operating and investing in the international business environment, surveyed over 500 capital markets executives to identify the impact that disruptive technology is having on jobs and skills. Of these, one in six (14%) believe that AI has already surpassed human-based systems.

In recent years, the data sources used in credit decision-making have become increasingly broad and non-traditional, now including social media activity, retail spending habits and even political inclinations.

The research revealed a division in the industry about the impact of using such data on the quality of decision-making. While a third (30%) of respondents believe that using a broader range of data reduces subjectivity, a fifth (18%) think AI exacerbates existing prejudices in the credit decision-making process.

Intertrust’s study also highlighted privacy concerns regarding expanded data sets. Although almost a third (31%) of respondents think that the use of non-traditional data such as and personalised algorithms leads to better credit decisions than just relying on detached data, 36% believe tighter legislation is required to protect borrowers’ rights when they apply for funding and to restrict the information included in the assessment. A fifth (20%) suggested that the use of non-traditional data has already overstepped the ethical line and needs to be better controlled.

Cliff Pearce, Global Head of Capital Markets at Intertrust said: “The use of AI in credit decision-making has become increasingly commonplace, with the potential to make quicker more accurate credit decisions based on an expanded set of available data.

“A challenge in this area is that AI systems are only as good as the information programmed into them. For example, while a prospect may look like a poor risk at first sight, there may be extenuating circumstances overlooked by the system that a human would have noted. Put simply, AI underlines the contrast between the prime and more specialised non-conforming lending markets.”

(Source: Intertrust)

As a result, they have expect payments to be easy, convenient, flexible, secure – in some cases they even want to be rewarded for making transactions. Below, Abhijit Deb, Head of Banking & Financial Services, UK & Ireland, at Cognizant, explains the ins and outs of card payments and the threats this payment method currently faces.

Customers will not stay loyal to their card providers if the service no longer meets their needs or expectations. As a result, we are entering an age where payment industry providers either have to be the source of transformation or face disruption from competitors challenging their market share. To avoid the latter, card providers should continue to innovate, creating new capabilities and features to bring greater security, added-value services, collaboration and convenience for their clients.

The future credit card

The shift in the payments landscape over the past few years has brought a substantial evolution in the role of payment cards. This transformation has not only impacted the types of cards that companies are launching – for example, Gemalto has developed fingerprint recognition credit cards  – but has also affected card providers’ strategies and aspirations.

But how long will we keep physical cards in our wallet? Will the move to cashless lead us to ultimately become wallet-less?

Payment networks like Visa, MasterCard, Discover and American Express have built a massive infrastructure, also known as ‘payment rails’, for processing transactions globally. As purchasing trends shift online, credit and debit cards are increasingly being used more for their ‘rails’ than for the traditional plastic card we use in-stores. Thus, the battleground for card providers is how to remain the default payment option across every channel, keeping them in the top spot in a spender’s digital wallet.

Apart from the obvious revenue advantages associated with being a preferred payment choice, such as interchange fees and interest charges, card providers with ‘top of the wallet’ status also have access to a rich pool of information. By harnessing data, card companies can provide an innovative and hyper-personalised customer experience to differentiate themselves or create a new stream of revenue, as seen with companies such as Google recently purchasing Mastercard credit card data to track users’ spending.

Evolving competitor landscape

With the incursion of the concept of ‘digital cards’, card issuers and their corresponding business model are under threat, no matter what position they hold in the rank.

With the incursion of the concept of ‘digital cards’, card issuers and their corresponding business model are under threat, no matter what position they hold in the rank.

Card providers have access to increasing amounts of payment and account information, and more assertive competitors are moving quickly to commercialise the opportunities. Online players, like PayPal and Square, are already poised to take a bigger industry lead over traditional credit card issuers thanks to their established online presence.

And, as their dominance grows, we are likely to see other digital players enter the payments space. Amazon, for example, is well known for having a business plan for every industry – and it is likely payments will not be any different. Having just launched a small loans service to SMEs, it is not hard to extend the logic to where Amazon is your bank and runs your entire network by Amazon “rails”. And the same could easily be said for Apple.

We may also see social media players get involved, coupling their user data with account information to provide quick credit checks or banking services.

So, what does this mean for traditional card providers?

Firstly, it is clear that marketing strategy can no longer be centred around a piece of plastic. Marketers must challenge themselves to think about how they can propagate brand loyalty and acquire customers in this changing market. At the moment, a vast amount of customer acquisition is achieved by cross-selling to other customers with partnerships. For example, the British Airways / American Express credit card enables consumers to collect Avios points on their day-to-day transactions.

Firstly, it is clear that marketing strategy can no longer be centred around a piece of plastic.

And how do they compete on the digital landscape? Many providers are racing to position themselves as the customer’s ‘digital front door’ to take advantage of additional account information. Card providers need to act fast to stay relevant.

In the short to mid-term, credit card providers must focus on trust. Currently, thanks to consumer banking regulations, clients have the peace of mind that if a card gets stolen, they are protected. For the time being, Apple Pay and other providers are not offering the same assurances to customers yet. However, when mobile payments start offering the same guarantees, what can card providers do to stop people switching?

In the long term, card players must ensure that they do not find themselves consigned to the role of the faceless underwriter. Card providers need to think about their role in the entire financial services ecosystem and create new, innovative services that respond to customers’ needs. Many forward-looking players are looking to launch offerings such as 360-degree views and financial management advice services.

In the long term, card players must ensure that they do not find themselves consigned to the role of the faceless underwriter.

By combining machine intelligence with data, other providers are already exploring how technology can create new customer and colleague experiences that are simple, fast, transparent and engaging. For example, American Express’ personal travel assistant app, Mezi, uses AI to help cardholders pay for vacations and business trips based on their preferences. Similarly, Bank of America’s virtual AI assistant Erica is helping clients with effective money management.

Only by creating these value-added services that respond to specific consumer needs can card providers avoid complete industry disruption and stay relevant.

These challenges have been widely overlooked to date and businesses have been left to cope with these cashflow difficulties themselves, with minimal support made available from banks or other financial services. Zoe Newman, Head of Partnerships at Capital on Tap, explains below.

Fintech enterprises have begun to recognise the need for a solution here and are helping to innovate trade credit through new partnerships and co-branded trade card products. This innovative and automated trade credit solution enables wholesalers to better support their customers by issuing them with co-branded trade cards which provide instant credit with which to fund business purchases.

For many independent retailers, short-term cash flow issues are a familiar experience which will have had a significant impact on their business and impeded their ability to buy goods. Typically for independent retailers or restaurants, this experience often involves a cycle of not being paid by clients and customers and, as such, not being able to afford to purchase goods from wholesalers. Often, when looking for an alternative solution, many will turn to short-term loans, the majority of which have high-interest rates which make them unsustainable economic solutions, with the perils outweighing any perceived benefits. Needless to say, this cycle is detrimental not only to these retailers but also to the independent wholesalers who are reliant on them for business.

For many independent retailers, short-term cash flow issues are a familiar experience which will have had a significant impact on their business and impeded their ability to buy goods.

However, the new partnerships between fintechs and wholesalers are providing a much-needed solution to this problem and offering SMEs access to trade credit for business purchases without the strings of many short-term alternatives. The co-branded cards also give customers a sense of security should they come into any unforeseen costs and doesn’t restrict them to only spending with the wholesale partner.

By partnering with a fintech finance specialist, wholesalers are able to help SMEs access funding which will allow them to grow their organisation and take advantage of business opportunities, while also encouraging more sales with them. This scheme is a far cry from many bank-issued credit cards or short-term loans, as not only does this give their customers more freedom and flexibility, but it also removes some of the costs and burdens associated with the high-interest short-term loans that many will have had to resort to previously.

Through these partnerships, wholesalers are also set to benefit. This is in part due to it increasing their customers’ spending potential with them. Additionally, thanks to the branded nature of the cards issued, customers are reminded of the wholesaler every time they take out their wallet or use the card, providing valuable exposure for the brands.

Ultimately, these partnerships are a welcome development for many SMEs who are finding that banks are not providing sustainable or suitable funding options for their businesses. For many of these businesses, the sums and terms on offer to them do not fit their needs and meeting the strict repayment fees can be difficult due to the peaks and troughs in their trading periods. In addition, it can take several weeks for these businesses to be approved bank-backed funding, while many fintech partnerships guarantee a decision and access to funds within hours or days. It is the hope that this will remove the reliance some businesses have on short-term loans, which have historically allowed instant credit but with high-risk terms and extreme interest rates. As such, many SMEs will see the advent of partnerships between fintechs and independent wholesalers as offering a much-needed solution to these problems.

For many of these businesses, the sums and terms on offer to them do not fit their needs and meeting the strict repayment fees can be difficult due to the peaks and troughs in their trading periods.

At Capital on Tap, we have developed a number of relationships with independent businesses and wholesalers, such as JJ Food Services, to help these businesses overcome many of these issues. The partnerships between fintechs and independent wholesalers are enabling these businesses to inspire increased customer-loyalty and customer satisfaction by recognising a need in their customers and providing a viable solution. The initiative also means that these businesses are no longer just wholesalers, but they are also service providers - adding a new string to their bow.