Ventures
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Living standards

Shock absorbers

Innovating to boost financial resilience in Europe

Louise Marston
Louise Marston

This paper reviews the potential for innovation to address financial resilience problems in France, Germany and the UK, emerging from the Covid-19 crisis. As such, it is a companion report to After Shocks, which provides evidence on the impact of the Covid-19 crisis on households in these countries. This paper sets out a framework of supply and demand to look at innovative approaches to financial resilience. This framework is applied to France, Germany and the UK, and suggestions made as to how innovation could best be supported in future.

We find that digital technologies have significant potential to contribute to improved financial resilience. However, caution should be used, as these approaches are not suitable for all the financial resilience issues present in these countries.
The financial resilience of a huge proportion of households in Europe has been damaged during the Covid-19 crisis, with borrowing increasing and savings used up. Repairing financial resilience will be an important priority in the coming months and years, and new approaches to finance and fintech will be one of the tools to help repair pre-crisis problems, and those created in the past year.

Key findings

  • France’s persistent unemployment problems have worsened through the crisis. Although those on low incomes are relatively better off than in Germany or the UK, there are still significant numbers on low incomes. There has been a policy focus on these issues in recent years, resulting in a number of charities and banks creating new approaches to address financial resilience issues.
  • Germany has fewer financial resilience challenges than the other countries, although the debts and low incomes of the poorest households are a concern. There is little acknowledgement of this problem by policymakers or financial institutions, making it harder to draw attention to the potential of innovation to provide help.
  • The UK has a wide range of financial resilience challenges, as the use of credit and lack of savings are present even in moderate income households. The UK also has higher levels of start-up innovation, but lacks the larger scale community finance and charitable institutions present in France and Germany that might help these ideas to scale.

Recommendations

  • Innovation support aimed at financial resilience should engage with the target users, to ensure that technologies and approaches are appropriate and relevant. Charities and frontline organisations can be useful partners to bring this perspective into an innovation process.
  • France has a range of innovations emerging from start-ups and existing institutions. Further cross-sector collaborations, as well as greater connections to the growing fintech sector could improve provision further.
  • Germany has fewer organisations that recognise financial resilience as a problem. Convening social and digital innovators with the large-scale charity networks might help to increase recognition of the problems, and develop ideas that suit the German context.
  • The UK has a variety of start-up support initiatives for financial resilience. Continued support for start-ups should be linked to greater support to scale, including via partnerships with financial institutions, charities and employers.

Further reading

Unsung Britain
The changing economic circumstances of the poorer half of Britain
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Mike Brewer, Molly Broome, Nye Cominetti, Adam Corlett, Charlie McCurdy, Louise Murphy, Cara Pacitti, Hannah Slaughter, James Smith, Lalitha Try
Cold comfort
Mitigating the Winter Fuel Payment cut
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Alex Clegg, Jonathan Marshall
The Living Standards Outlook 2024
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Alex Clegg, Adam Corlett
Louise Marston
Louise Marston Director of Ventures