Open Finance – improve consumer credit

The consumer credit sector is arguably more open to change and innovation than most financial services, and therefore constitutes a beacon of opportunity for Open Finance.

  • 15 million people in the UK lack access to affordable credit, creating huge disparities in financial inclusion.
  • Credit risk assessments can unintentionally disadvantage people based on their background, ethnicity and gender.
  • For many, credit scores are opaque and confusing concepts that are difficult to improve.

“We’re seeing more and more gender and race imbalances in financial services algorithms where data goes into a black box – if the black box designers are a typical kind of person, it will come out with that kind of thing.” bias. »- Felicia Meyerowitz Singh, CEO of Akoni

How will Open Finance boost the consumer credit market?

Help those who are in a cycle of perpetual debt

We often talk about credit, but we often overlook the other side of the coin: debt.

OpenMoney helps consumers manage, save and invest their money, based on a comprehensive view of their financial situation. For those in need, this journey begins with practical advice on how to eradicate debt.

Despite the offering of investment products, this approach puts client adequacy, well-being and awareness at the heart of its concerns, because Open Finance has the power to do more for clients.

“It hits vulnerable customers and personalization before making assumptions or pushing the product,” Vaughan Jenkins, director of business development at Moneyhub.

Help those who have difficulty accessing suitable products

Credit Kudos transforms the credit scoring system, using financial transaction data to enable fairer and better credit decisions. They provide rich insight using Open Banking data to help lenders, brokers and financial institutions better understand a borrower’s financial behavior. Their knowledge provides creditors with a more detailed view of an individual’s current financial situation than would be contained in a traditional credit report. This information helps lenders more accurately assess an applicant’s affordability and credit risk, in turn helping them increase acceptances, reduce defaults, and make credit decisions faster.

Among other things, this is used to increase responsible lending in the burgeoning and sometimes controversial Buy Now, Pay Later (BNPL) market. Credit Kudos’ enriched affordability information enables lender BNPL Zilch to make more informed lending decisions.

Account Score also uses bank transaction data to produce affordability ratings, but reinforce this with data from traditional offices through their long-standing partnership with Equifax – creating a detailed and holistic view of an individual or company. a little company.

Their Financial Health Index has conclusively shown that women have higher creditworthiness than the office data could determine on its own. This begins to eliminate the systemic bias that has existed for years and prevents many creditworthy people from accessing the financial products they may need.

Experian also recently released its Scoreboost service. Consumers can share their bank details to improve their credit score and access better value services. Over the years, Experian’s leading approach to data integration has enabled it to develop numerous products that improve the financial lives of consumers.

Help those who lack financial knowledge

It is understood that financial education across the UK is low.

By analyzing bank transaction data – in the future, aggregate financial data – credit bureaus, referral agencies and lenders should be able to help customers improve their creditworthiness.

Freedom Finance and AccountScore’s FusionScore is used to bring out an individual’s credit score while educating them with gentle nudges to point clients in the right direction.

“More and more people want to get an education, and we are incredibly passionate that financial education is absolutely essential.” Emma Steeley, CEO of Account Score

Considerations on Open Finance in Credit Solutions:

Don’t marginalize the marginalized

Personalized pricing can benefit those in a favorable position to the detriment of those who need access to credit. Credit Kudos’ collaboration with the Serve and Protect credit union for the military and police has enabled previously underserved clients to access more affordable credit, with repayment when the individual displays positive financial behaviors. Through personalized products, they have increased access to credit while improving financial education and well-being.

The suitability of the product cannot be ignored

Not everyone should have access to credit – Open Finance has the power to prevent greater hardship for those who need it most.

Credit may not be the best answer

Greater availability of data creates positive alternatives to credit. As an alternative, FastPAYE allows you to access the money you have already earned before your predefined payday. Mostly, it’s not credit.

About Natalee Broderick

Natalee Broderick

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