Talk Money Week 2023 – Segmentation: Meet the Unsteady Starters

It’s Talk Money Week this week – a week designed to break the taboo of talking about money and improve people’s financial wellbeing. We’ve asked the Fair4All Finance team to share their thoughts throughout the week on ‘if you could do one thing…’ to improve financial inclusion.

In this blog, Lauren Peel, Director of Consumer Insights and Propositions, talks about the role of banks, building societies and other providers in doing one thing to meet the needs of people in financially vulnerable circumstances.

‘I’m working two jobs at the moment to make ends meet’

‘My family members are experiencing tough times financially and this gives me a bit of worry as at times I am having to help them out, which puts extra pressure on me’

‘Constantly seeing how much more money is leaving my account than coming in due to the increased cost of everything is worrying’

Unsteady Starters are the youngest of our six segments of people in financially vulnerable circumstances, and the smallest segment at 1.3m people. However, they are a critical segment to design for and serve, as the solutions they are able to access (and not access) in the earlier stages of their financial lives will have a significant impact for the long term.

Unsteady Starters: what do you need to know?

• Primarily aged 18-34, with household incomes above £25k
• Majority are private renters, with some living with family or friends
• Almost half have children at home, and 1 in 10 are single parents
• 30% have no savings, up from 22% at the start of 2022. Building savings is a key priority for them to achieve their goals, whether that’s moving to a new place or supporting their family
• At least 1 in 5 are on zero hour contracts
• 30% have some form of caring responsibility, with 13% saying they care for a partner that lives with them and 5% caring for a parent that lives with them. This creates additional mental and financial strain

Diving deeper into their financial needs

1. Savings is a priority for all in this segment, but cost of living increases are draining pots and making it almost impossible to rebuild

In our qualitative insights, Unsteady Starters were bringing savings motivations to life in ways that work for them.

Alicia*, a mother of two young children, had a savings account that allowed her to upload a photo to the front of her digital savings pot. Having a photo of her children was motivating and also a barrier to dipping into savings, as she was passionate about saving for their future.

Hannah* had a small lockbox in her kitchen cupboard where she would put any £1 coins that she received. This small, tangible action made her feel more in control.

We were surprised to see just how many people in Unsteady Starters were moving towards cash as a method of controlling spending, as well as building savings.

2. Unsteady Starters under index for credit cards use – either due to lack of access, or because it’s not meeting their needs

Meanwhile, they over index for payday loans (and other forms of high cost short term credit). In our interviews we found some had been declined for credit cards due to low credit scores – although we expect some of this may be down to thin credit files as well.

They are slightly more likely to be using Buy Now Pay Later products than other segments. However, their reason for using Buy Now pay Later is different – almost 1 in 5 say it’s a helpful solution due to a variable income (vs 13% for other segments), reflecting a needs gap. Worryingly, more than 1 in 3 had incurred late fees on Buy Now Pay Later.  

3. Unsurprisingly, Unsteady Starters are less likely to have a home or contents policy than other segments

With the majority of Unsteady Starters renting, many are not protecting their contents. We’re working with a Financial Inclusion Insurance Action Group to understand more on the barriers to access, and what a great proposition for private renters looks like.

In our survey, it was surprising to see 15% with health insurance, which may be as a result of the number on zero hours contracts or who are self employed (for example as personal trainers). We’d like to understand this further.

What does this mean for designing propositions?

In the FCA’s Consumer Duty, the Consumer Principle 12 requires firms to ‘act to deliver good outcomes for retail consumers’. That means understanding the needs and distinct challenges of different consumer groups, and designing and delivering propositions that meet those needs.

For each of our six segments, we’re asking all organisations to consider specific questions to meet consumer needs. For Unsteady Starters this includes:

• What solutions can help smooth incomes for people on zero hours contracts?
• How can savings be easy, repeatable and protected?
• What could help renters access, and stay in, appropriate properties?
• How can we build, or rebuild, credit files to improve future financial lives?

Do one thing

Getting back to basics. When you’re designing propositions – whether you’re Apple, Amazon, Argos or even an organisation that doesn’t begin with A – you start with understanding the needs of your consumers, and then designing for them. The most successful organisations do this consistently, and test and iterate along the way.

For this purpose, we’ve made our segmentation materials available publicly, as it’s critical that all financial providers have the starting tools to understand the needs of people in financially vulnerable circumstances. You can access this here.

In addition to our open to all webinars, we’re able to run one to one sessions with organisations who have the capability and the capacity to do more to support these consumers. This includes customer immersion sessions, and proposition innovation workshops. Get in touch if you’d like to discuss this further.