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The Role of CBT and Psychoeducation in Building Financial Capability in Underserved Populations

In our latest contributor piece, we hear from Dr Vicky Root, Behavioural Science Lead for Good With.

As the cost of living crisis continues in the UK, people are being forced to adopt new strategies to soften the blow of rising rent, food, and energy prices. For some, this means using new credit to pay the bills. For others who cannot access credit from mainstream lenders due to thin credit files or adverse credit history, it means cutting back on essentials just to make ends meet. 

This underserved, or ‘unbanked’, population is growing. For instance, around 2.8 million low-income households faced lending denials between 2021 and 2023, with a corresponding 29% increase in the number of people without credit history in the last six years. 

The consequences of this financial strain extend far beyond unsecured debt and missed financial opportunities. Statistics suggest a rise in defaults and a significant negative impact on the financial wellbeing of these populations. 

Why does financial wellbeing matter as much as credit history? 

Financial wellbeing is more than just a number based on lending history; it encompasses an individual’s perception of their ability to maintain their desired standard of living and achieve financial security. 

It considers the individual’s financial mindset and attitude towards money. And at Good With, we believe this is just as important, if not more so, than credit history when assessing creditworthiness. 

This is because we know that those who may excessively worry or feel down about money are also likely to have poorer financial capability, and vice versa. Common mental health problems, like anxiety and depression, therefore, do not present in isolation and can influence a person’s financial situation. In fact, studies have shown that: 

● Those with poor mental health are three times more likely to be behind on at least one key payment (e.g. energy bills, rent, credit cards) and are more likely to feel anxiety or dread hearing from creditors. 

● They may also face barriers to accessing healthcare, experience unstable income, report productivity losses, and potentially have impaired decision-making abilities.

These factors can lead to financially precarious situations. In turn, worsening financial situations can lead to excessive worry, stress, decreased resilience, and even impact physical health. For example, those with lower incomes are 1.5 – 3 times more likely than those with higher incomes to experience depression or anxiety. Moreover, daily worries like money anxiety can lead to more severe negative mental health events in the future. Not only that, but these effects are heightened in underserved communities, such as young adults. 

By addressing underlying financial anxieties and behaviours through interventions like CBT (Cognitive Behavioural Therapy) and psychoeducation, we can empower individuals to break free from this cycle and build a brighter financial future. 

How is Good With Bridging the Gap? 

To do this, assessing a person’s relationship to money holistically is key. 

This means taking into account and measuring psychological factors such as anxiety, confidence, and wellbeing. Doing so allows a more accurate snapshot of how a person thinks, feels, and behaves with money, expanding the definition of creditworthiness from opaque credit history to a more human encapsulation. That’s why we at Good With have developed the Readiness Score™, a holistic snapshot of one’s current financial health and wellbeing that considers these psychological factors. 

Once you know an individual’s mindset regarding money, you can begin to design tailor-made support and education for optimal behaviour change. At Good With, we package this in something called FinIQTM—a free, AI-driven, personalised financial psychoeducational program. Our FinIQTM pathways combine practical financial education with proven CBT techniques, addressing financial skills development and mental wellbeing in one solution. 

“We know that how we feel about things is a better predictor of mental wellbeing than the situation itself. Using CBT tools, we can develop skills to change how we feel about money.” 

Sam Skerrett, Behavioural Psychologist for Good With, MSc Neuropsychology, NHS. 

CBT is echoed throughout the rest of Good With’s features, too. For example, users can track their mood alongside their spending habits, a feature inspired by the CBT thought journal exercise to foster empowerment and self-awareness. By promoting actionable change and challenging negative feelings and behaviours, users are equipped with the tools to grow their Readiness Score™. 

Our research has shown a significant decline in money-related anxiety and a corresponding increase in financial confidence after engaging with the app and our FinIQTM pathways for as little as three weeks, especially among financially vulnerable people. This is promising evidence supporting the effectiveness of Good With’s approach. 

‘I think I have been more conscious about making decisions, and I know it is linked to my mental health, like in a deeper way than I thought it was.’ (study participant) 

The future of creditworthiness 

By reimagining creditworthiness as more of a ‘psychological readiness’, the financial services industry can better serve vulnerable communities. Not only that, we believe Readiness Score™ can provide a more holistic measure of credit risk in consumers who already have access to credit products. By doing so, we aim to promote positive and confident mindsets when it comes to money, empowering underserved and vulnerable communities with the tools they need to improve their financial capability, confidence, and, ultimately, their wellbeing. It also helps financial services identify the underserved but good candidates for credit, opening up the market potential and allowing access to fair finance for all.

Good With was recently crowned the Super Connect for Good 2023 FinTech for Good Winner by Lloyds Banking Group Launch Innovation Programme and FinTech B2B Marketing for the Global Tech for Good competition powered by Empact Ventures and Hays.

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