The shifting credit landscape in the digital age

Written by Dave Wallace
16th August 2024

One of my first big digital finance projects was launching the Marbles credit card for HFC Bank in the late 1990s. Marbles was billed as the first online credit card in the UK.

The credit industry needs to catch up with societal changes

It is very memorable for me. The legendary Wolff Olins was tasked with branding. The newly founded Mother handled its launch advertising campaign (Mother would also rapidly become one of the darlings of the advertising world). And I handled online advertising. Unfortunately, I never made it to be a God of digital media (or anything else, for that matter).

In fairness, the budget was £750,000 – the highest budget from a finance company for online advertising at that particular moment in digital history. I struggled to buy enough inventory because, in those days, there wasn’t a massive amount on offer.

My team was also charged with the UX and design, which was lovely. There was lots of beautiful whitespace and big, bold images of marbles.

Marbles joined a multitude of other credit card products. HFC had an enormous portfolio. I remember being staggered by all the cards that it had. And HFC was not alone. There was a plethora of credit card companies, which meant lots and lots of plastic. In those days, every day was a credit card offer day, as direct mail targeted the UK population with offers using demographic and postcode targeting.

And what happened? We all got credit cards.

We also left home. As fully paid-up members of Generation X, the script for our lives was to leave home at 18 and, unless total disaster struck, remain not living at home. We were able to afford mortgages.

Between credit cards and mortgages, we built up a credit history, and with that credit history, we could take out loans, more credit cards (not too many, mind), and other mortgages. Credit was a prominent feature of our lives.

Wind forward to the present day. I love to sauna. My brother is married to a Finnish lady, and through them, I have discovered the delights of sitting in an uncomfortably hot wooden box. For a Brit, I am pretty good at saunaing. I can cope with high temperatures for long periods.

My secret is conversing with the others who happen to be in the sauna. And I have met some fascinating people and ended up chatting about some incredible things. Ask Monika from Enfuce if they use a sauna to grill people for their podcast. Saunas facilitate great conversation.

One such exchange concerned credit and credit histories with a fellow named Tom. How did we get onto that subject? Who knows? But Tom told me about the generational shift which is locking people out of credit. He mentioned his sister, who, in 2009, had just completed her legal education and secured a well-paying job in the city and had attempted to finance a sofa on a £4-per-week payment plan. Despite her strong financial standing, she was rejected due to having a “thin file” or no credit history.

Tom had the ah-ha moment for a business.

At this point in the story, I was too hot to stay in the sauna, but I was intrigued.

We had a subsequent follow-up conversation (which you can listen to on the Dave and Dharm Demystify podcast soon) in a cooler setting. Tom Eyre is the founder of Loqbox, a proposition to help individuals build or improve their credit scores.

Tom talked more about his sister and her problems with getting credit. And she is not alone. According to Tom, at least 2.5 million adults in the UK are unserved by the credit market, meaning they are invisible to the financial system. Of these, approximately 1.5 million are young, and one million are new to the country.

Beyond those invisible to the financial system, approximately 12 million UK adults are underserved by the UK financial market due to having little or no credit history.

These numbers are startling.

We now live in a very different world from those Marbles days of the 1990s. I cannot remember the last time that I saw credit card advertising. Mail preferences have stopped direct mail. Following the 2008 financial crisis, credit product regulations and scrutiny have increased. Younger generations are less likely to own traditional credit cards, opting for digital and prepaid payment solutions. Additionally, there is a growing preference for buy now, pay later (BNPL) services, which do not require a credit card but still allow consumers to defer payments. The average age for buying a house has also gone up.

I know from personal experience that my children don’t have credit cards. They still live at home and are not building a credit history. And it is not just them. For instance, a December 2023 poll undertaken by Virgin Media of 1,000 adults aged 18 to 35 found that almost a third (32%) still have their phone bill paid for by their mum and dad, while 35% also use their logins to TV streaming services. Similar numbers have utilities paid for as well.

The industry needs to catch up with societal changes.

Loqbox offers a unique way to build credit by allowing users to save money each month. The amount saved is used to demonstrate regular, responsible financial behaviour, which is then reported to credit reference agencies. Users commit to saving a fixed amount each month by taking out what is effectively a form of secured loan. The total amount saved is returned to the user at the end of the saving period. This structure encourages disciplined saving while also building credit. Wrapped around the product is financial education, which helps customers in the long term.

The credit industry may need an overhaul. Loqbox offers a fix for a systemic problem, but the world is changing and moving fast. Undoubtedly, the financial boundaries within family units are being blurred, and new products mean that opportunities for individuals to build credit scores are declining. That’s before factoring in the possibility of AI agents interceding between individuals and institutions. As we stand on the brink of a new financial era driven by AI and digital innovation, the question remains: will the concept of a credit score as we know it become obsolete?

So, I ask you: in the age of AI, where does a credit score sit? With an individual or the AI agent?

About the author

Dave Wallace is a user experience and marketing professional who has spent the last 30 years helping financial services companies design, launch and evolve digital customer experiences.