Before the Covid-19 storm hit, there were 11.95m+ households in the UK with less than £1,500 in savings. Since early March, the catastrophic impact of the pandemic has highlighted the treacherous situation the country is facing regarding personal savings. The UK nation is bankrupted.

The latest data from the Money & Pensions Service, The UK Strategy for Financial Wellbeing report 2020-2030, indicates that 11.5m people have less than £100 in savings, 9m often borrow to buy food and pay bills, 22m say they don’t have enough to retire on. Scary stuff.

At this very moment, the UK government is paying c.11.4m people's monthly wages - 9.3m people on furlough (as of June 28, 2022), and another 2.3m self-employed claiming assistance, according to the Office for National Statistics. That is 20 per cent of the workforce. 20 per cent, which if the government did not assist them, would be receiving nothing since March. The concern is: what happens after these support payments stop?

The second dimension of the concern is that the pandemic is causing a greater wealth gap: higher-income families are saving more due to lower discretionary spending (less eating out, buying high-end fashion and travelling), but lower-income households are twice as likely to have increased their debts during the coronavirus lockdown, according to research from think tank, Resolution Foundation.

The UK is (finally) saving money

The pandemic has indeed changed something for the better too. For the first time in conscious history, many people have the time, albeit motivated by fear, to take ‘the pain’ to sort out their finances. A study of 2,000 adults found one third have been putting extra money aside - an average of £459 - since lockdown began. This lucky portion of the population has been able to save money they would have otherwise spent on commuting or eating out.

Another trend that data shows is that, during lockdown, 18 to 29-year-olds have increased credits to their savings accounts by 3.8 per cent, and their savings balances have increased by 9.9 per cent – a percentage increase higher than any other age group. As young people didn’t fully experience the 2008 crisis in their working lives, the financial uncertainty they have felt during Covid-19 is something they will likely forever remember, and perhaps this has nudged them to take action on their savings more than any other group.

The financial impact of Covid-19 has forced significant change for millennials too. Their employment has been hugely affected by the pandemic, but since lockdown started, they have changed their financial viewpoint. 83 per cent of millennials say they view their finances differently since the pandemic started, compared to only 33 per cent of people over 60.

But what about the long haul?

What happens when restaurants open, commutes to work begin again, and people want to wear nice new clothes again? Where will the ‘spare cash’ come from when the whole of the UK, in fact, the world, is in the middle of an economic crisis? The answer? Open Banking data. Insert a new ‘data for cash exchange’ opportunity which will see customers automating their savings through the interface of a few macro trends: open banking, machine learning and AI, retailers’ change in approach and the wider economic impact of Covid-19.

Insert open banking

In the upcoming months, with recession around the corner, saving is going to become a lifestyle trend. It’s critical that everyone - government, employers, retailers and households  - work together to build financial resilience for the country.

Historically, we’ve seen that during a recession people do a few things (not unexpected): they spend more time thinking about their money, they look to optimise their savings, and they try to optimise their spending. The latter specifically means that consumers turn to cashback and voucher sites more than ever in a bid to make their money go further.

The only issue with these responses is that unless there is significant fear or direct financial impact, these good behaviours don’t last.

What we know is that people want saving to be as effortless as possible. Even people with surplus incomes don't enjoy spending time managing their finances. Anything that companies do to reduce friction and overcome consumer’s inertia around saving, will help get people ‘started’.

We also know that saving is a habit like any other, on average, once people see savings of around £200, they are driven to save more. So it’s up to innovative fintechs and open banking providers to make that journey as frictionless and automatic as possible and help consumers overcome the initial hurdle of ‘it’s just a few pounds, it doesn’t make any difference’ and help them find extra ways to autosave. This is an opportunity for Open Banking to finally live up to its potential.

We need to dig the well before we need the water. By helping consumers turn their valuable open banking data into insights, and ultimately into savings, we can help them save as they spend. Achieve this, and we can help build a nation of savers post-Covid-19 and put bankruptcy behind us.

Andries Smit  - CEO and Founder of Upside.