The latest data from Barclays underlines the need for increased personalisation from financial services as card spending growth fell significantly in October.
Barclays cited spiking energy bills and concerns over Christmas costs as a key reason for the decline in card spending – as consumer card spending grew just 2.6% year-on-year in October – less than the latest CPIH inflation rate of 6.3%.
As the market continues to tighten and consumer demands elevate, Nelson Wootton, Co-Founder and CEO of core banking engine startup SaaScada emphasises that it should act as evidence that banks and financial firms need to double down on personalisation in an ever-tighter consumer lending market.
Wootton commented: “Consumer spending behaviours are clearly starting to change as higher interest rates continue to bite. However, essential card spending growth has barely slowed: 3.9% in October, down from 4.6% in September.
“The biggest change appears to be around how people are sourcing their money – in the face of high inflation and stagnant real wage growth, consumers are increasingly dipping into savings or relying on credit.”
Looking ahead, 36% of consumers anticipate that this Christmas will be more expensive than in 2022, and a fifth have concerns about keeping up with outgoing costs during the festive period.
Esme Harwood, Director at Barclays, said: “Brits cut back on non-essential categories such as clothing and restaurants in October, as thoughts turned to saving for Christmas and budgeting for winter fuel bills.
“The unseasonably warm weather also hampered spending on indoor experiences, including digital streaming services and takeaways. However, pubs, bars & clubs still achieved strong growth, boosted by England’s performance at the Rugby World Cup, while the travel sector benefited from a rise in holiday bookings.
“At the supermarket, value-for-money is still a priority, with consumers increasingly wary of “slack-filling”, when a product’s packaging hides unnecessary empty space inside. On a brighter note, supermarkets are also being given credit for trying to keep prices down, with one in three noticing price cuts on everyday items.”
Jack Meaning, Chief UK Economist at Barclays, said: “It looks as though the oomph continues to go out of squeezed UK consumers. The latest transaction data shows they are pulling back from discretionary spending and increasingly worried about their future ability to spend, adding to the picture painted by other data.
“Third-party consumer confidence data showed a significant drop in October, coming off the back retail sales contracting significantly in September. While some of these effects might be being amplified by unseasonal weather, it’s hard to dismiss the growing evidence.”
Wootton also detailed that the current economic climate is evolving the way people view money and continue to budget.
He added: “Against this backdrop, people are changing the way they are spending money – to accommodate these changes, banks and financial services firms that want to differentiate themselves must stand out with greater real-time personalisation.
“That means bespoke rates, terms, and perks – think regular offers for rewards and cashback programmes that reflect recent customer activity. To make these personalised offerings, banks need to make far better use of their under-tapped reserves of customer data for continuous insights.”
