A borrowing trend is on the rise in Europe as more consumers struggle to keep up with increases to the cost of living, yet, as financial challenges mount, basic financial literacy among consumers is on the decline, a new survey has found.
This is according to Intrum, a Swedish credit management firm, whose European Consumer Payment Report is based on a poll of around 24,000 respondents across 24 European countries.
Now in its seventh year, the report revealed that 45% of European consumers say their bills are increasing at a faster rate than their income and that a quarter (24%) have had to borrow money or reach their credit card limit to pay them.
And although three-quarters (75%) of European consumers still manage to save part of their salary every month, more than half (52%) are dissatisfied with the amount they are able to save.
The findings, which come as the cost of living has become a central topic in the British general election, have clear implications about the ability of European consumers to save for their retirement and unexpected life events, as well as their general sense of wellbeing.
But interestingly, the report also suggested that their tendency to borrow is also being driven by social media pressure, online shopping and easier access to fast credit.
For example, half (51%) of 18-21-year-olds claim social media puts pressure on them to consume more than they should, compared with 31% of consumers across all age groups.
“While we see consumers are keen to use smartphone-enabled technology, concerns over data security and fraud remain, along with the pressure to overspend and the temptation to borrow more than they can afford,” said Eddie Nott, Intrum’s UK managing director, in comments reported by the Financial Times.
Financial literacy is also a concern after Intrum tested European consumers to find that 37%, rising to half of 18-21-year-olds, failed to match basic financial terms to their correct definitions.
Commenting on the research, Mikael Ericson, president & CEO of Intrum, said: “Our findings show that a borrowing culture is on the rise, as more consumers are now struggling to keep up with the rising cost of living.
“As financial challenges mount in Europe, basic financial literacy among consumers keeps on declining, especially among the younger population.”
Sourced from Intrum, Financial Times; additional content by WARC staff