Affordability: the consumer perspective

How much money do you have?

For many of us, that isn’t as easy a question to answer as might be expected. For one thing, when we move beyond the kind of hand-to-mouth experience that characterised my own student days, things (fortunately) become a little more complicated. Any one individual may have a variety of assets, accounts, pensions, and so on. 

But more significantly, the answer to the ‘how much money’ question is in fact an interplay between assets, income, commitments and expenditure that at any given moment in time can be hard to establish. To give a simple example, having a balance of £2,000 in a current account doesn’t mean much if £3,000 in mortgage payments and bills are due to be paid in the same month.

Indeed, for many consumers, a better and more relevant question might be: “can I afford to spend this money, at this moment in time, or commit to this long-term cost given the state of my finances?” That, after all, is the main reason why we might want to know how much money we have (vanity aside).

And ultimately this is an issue of affordability.

What affordability means for consumers

At ClearStake we work with organisations who, for whatever reason, are committed to ensuring that their own customers do not get into financial difficulty. In some cases it is a regulatory requirement, in others, such as lending, it is both a legal requirement and a matter of protecting both parties. 

But what about helping consumers to help themselves? What about giving the same insight and knowledge, and the same protection, to the man or woman on the Clapham omnibus? We absolutely feel this is also part of our mission at ClearStake.

Think of it this way. At the heart of our technology is the ability to ingest fundamentally ‘unstructured’ financial data and:

• Automatically detect, quantify and classify sources of income, across multiple accounts if necessary
• Do the same for “essential” costs such as insurance, taxes, utilities, telephone, cable
• And the same again for what we might call ’committed” spending - important reoccurring commitments like loans mortgages, rent, and credit.

When we do this, in addition to seeing current balances we also enable individual consumers to understand how much surplus money they have at any moment in time, based on expected income and expenditure into the future. 

In other words, there is no longer a requirement to undertake complex mental calculations before understanding whether a particular purchase is likely to lead to trouble down the line, or is (hopefully) more than affordable at any particular moment in time.

For consumers, this is fantastically valuable information to have at our fingertips. It stops the ability to gradually spend our way into trouble in its tracks. Instead, at the moment of decision, all the relevant information is available to us and summarised for us, and we also have the ability to see into the future (to some extent at least) and thus avoid making poor financial decisions.

The benefits are not limited solely to the above, however. As noted, ClearStake also automatically classifies spending and can thus report to the individual in terms of where their money is going, and the ‘velocity’ of their spend in any specific area. It is even possible to set up spending targets and alerts, to ensure that it is impossible to walk into an issue with a particular category of spend: if a certain threshold is passed within a particular period of time, you will know about it!

Meanwhile for those individuals who are in financial difficulty and need to find a way out, the affordability approach helps make sense of finances across multiple accounts, enables the consumer to ringfence essential spending, and easily calculate how much can be repaid per month in order to return to financial stability.

The result of all this: consumers have a significantly clearer view of their financial situation (rather than just a balance) and more control than ever when it comes to monitoring and improving that situation. They also have total control over who sees that data in order for them to access improved products and services. ClearStakes provide more clarity, more security, and more insight than ever before possible when it comes to your own financial situation.

We think that matters, and we believe that consumers will love the control and confidence affordability solutions such as ClearStake will give them. We certainly look forward to finding out!