According to a report by TotallyMoney, which surveyed 200,000 customers between March 2022 and May 2024, this is an increase of 3.14 million people who are or have been under-served over the past two years and makes up 45% of the UK adult population.

The report stated that this was being driven by high inflation limiting disposable incomes, with 14% of those surveyed feeling burdened by domestic bills and credit commitments and increasing borrowing to plug the gap.

It found that around five-and-a-half million people are estimated to have missed a bill payment and were increasingly reliant on credit and buy now, pay later (BNPL).

TotallyMoney added that “higher rates, tighter regulation and customers struggling to keep up with commitment” had led to lenders withdrawing products, restricting their lending and increasing fees and rates.

It noted that around nine million adults were declined for credit in the last 12 months, putting them in the under-served camp.

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TotallyMoney said that credit reports have “failed to evolve with society” and “don’t fully recognise renters, gig workers, freelancers, the self-employed, and those with little or no credit history”.

However, they are the “backbone of most lending decisions”, meaning many people are being under-served.

 

‘A real concern’

Alastair Douglas, CEO of TotallyMoney, said: “The continued growth in the number of people unable to access mainstream financial products is a real concern. Millions are being pushed into the arms of unregulated and illegal money lenders, which can come with considerably higher costs and little, or no, protection.

“The system is broken, and the new government must work with the financial services and the regulator to create an industry [that] works for everyone. Only then can people be able to spend, save, and borrow in a way [that] is fair and transparent.”

He continued: “Without support, the trend will only continue. The cost of living is now much higher than it was, and unemployment and economic activity are continuing to rise, while [the] industry fails to keep pace with change. As the FCA stated last year, ‘A well-functioning credit market helps protect consumers, improve consumer outcomes and increase market efficiency. It is also ultimately good for the UK economy and its sustainable growth in the long term.’

“If you’re struggling to manage your money, then consider downloading a free personal finance app [that] lets you connect an account via open banking. It should give you insights into what’s holding you back, and provide you with a personalised plan to help you start moving forward.

“Some lenders will now use open banking data instead of checking your credit report – giving them improved insight into your finances, so they can match you with better and more personalised options. You’ll often receive more pre-approved offers and at improved rates, so you can pay less interest, meaning your money can start growing.”