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A taste of things to come LendingMetrics’ Commercial Director David Wylie considers what the lending and referencing landscape will look like in 2032.

"Unaffordable gaming is a significant area of concern for regulators."

The past 10 years have seen major changes to the lending environment in the UK. The year 2012 was a marked- ly different place to the one we know today. Lending was still an analogue world: paper proofs, faxes, and, it goes without saying, sclerotically slow decision making from the borrower’s perspective. Fast-forward ten years and we all know what today looks like in our mostly digital lending environment. The pos- sibility of real time data, auto-assisted underwriting, rapid decision making and 100% accurate affordability assessments. So, given the dramatic level of change we’ve seen over the past 10 years, what can we expect for the next 10? Understandably, it wouldn't be impossi- ble to precisely predict the future path of our sector, but I think we can safely tease out a few strands already appar- ent that are going to develop consider-

able momentum over the next decade. Data will continue to be king. By 2032 all lenders will know that data, rather than products, should be their primary focus. No longer will there be a place for those who largely ignore data streams; or those who focus on tweaking exist- ing products and launching new ones to attract business. The overarching emphasis will be on using granular data to anticipate demand and then coming up with bespoke financial products for individ - uals that mesh seamlessly with their personal life. With data as the keystone of lending, I also see internet media companies coming to take a bigger slice of the lending pie. There can’t be many under the age of 60 who don’t already have a Facebook, Whatsapp or Twitter account, or who do not use payment apps such as Google Wallet or Apple Pay. Social media and payment apps have seen incredible

expansion in recent years. It’s a certain- ty that this will continue and that Meta, Apple and Google are going to want to capitalise on the screen time they attract and the mountain of consumer data that they have amassed. They may well already be testing how accurate their profiling is; setting it against that of the credit reference bureaus. Retrospective analysis to work out how predictive their scores are cannot be far away. We should expect them to be in a posi- tion to harness their platforms and pitch finance propositions to consumers as and when they are likely to be needed. It’s not difficult to imagine the potential: you begin to think about buying a new car; here’s a list of suitable models, best prices, and a choice of bespoke finance propositions. Initially, they could be in partnership with selected lenders, but in time there is no reason to suppose that they will not want to leverage their own balance

sheet to become lenders in their own right. Credit referencing’s closed-user groups will also undoubtedly undergo change over the coming years. The attraction of having real-time banking data as an integral part of every credit file is going to be overwhelming. Open Banking will have taken off - in a way that has not been possible to date - giving real-time access to con- sumer transaction data. Existing credit bureaus will have many more dynamic data feeds to work with, giving them the ability to deliver instant 360 degree assessments. Those currently excluded from the user groups may well gain access for credit assessments, given the quality of the information that will be possible. For example, unaffordable gaming is a significant area of concern for regula - tors, but gaming operators have never gained access to credit data via user groups. The banks have provided it to credit bureaus because they, in return, obtain access to credit files; however

there has been no such quid pro quo with gaming operators. Now that we are entering an era of ever-greater consum- er protection, we cannot expect such exclusions to remain in place forever. The FCA's current review into the credit reference industry makes it clear that regulatory change is on the horizon. With that, we can also anticipate regula- tion demanding additional layers of due diligence as the years tick by. The direc- tion of travel is towards a world where regulation permits only borrowing that is demonstrably in the best interests of the applicant. The day when consumers had to look out for themselves when making bor- rowing decisions will be a distant memory. Consumer duty is the latest emphasis and we can expect more of the same around safeguarding and vul- nerability, demanding yet more layers of required information on top of the traditional loan performance data, bank verification, AML and ID. You have to wonder what volume of lending will be achievable in such a tightly-regulated environment, given

that interest rates may well be high and UK household debt is already at record levels. This, perhaps, more than any of what I have explored above, will be the most important question determining the shape of our business. Could we in 2032 enter an era where regulation has made what could be deemed “unwise lending” impossible, and where far smarter lending is the rule at the cost of relatively static volumes?

Only time will tell.

"Payment apps have seen incredible expansion in recent years."

Above: LendingMetrics' Commercial Director David Wylie

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