Taking a Risk Comment by Neil Williams, CTO of LendingMetrics Pricing flexibility is something that surrounds us as consumers. parties. This data, which has always been jealously guarded by the major banks, is now available to all lenders (with the agreement of the finance ap- plicant) via account information service providers.
With an applicant’s permission, months of transactions can be probed. Read-on- ly data comes directly from the bank that holds the current account to the AISP, so there is no scope for fraud.
Ten years ago, I might have gone into a corner shop and asked for a bar of Cad- bury’s Dairy Milk. Back then, the news- agent would have known exactly what I wanted, as there was only one Dairy Milk. It was in bar form and, apart from a large or small bar, that was the limit of the choices on offer. Today, if I go into a shop, I am presented with a never-ending array of Dairy Milk in any number of forms – bars, party bags, eggs, boxes, etc. There is even a ‘Mummy’ Dairy Milk bar for children to buy to take home to their mum. The point is, there is an almost infinite range of price points and product packs to hit the consumer with. If the consum- er is even vaguely interested in Dairy Milk, there is something there to inter- est them. Such variety is proven time and again to increase sales over the previous ‘take-it-or-leave-it’ stance. But in finance this degree of flexibil- ity has been more difficult and quite expensive to achieve. Products have been more along the ‘take-it-or-leave-it’ model. If you didn’t make the criteria, you could not have the product. And the product was the way it was, no chance of tweaking it. Many lenders have this sort of stance today, although they might not realise it. But technology has moved on and it is now perfectly possible to have a ‘Dairy Milk’ product offer within finance. So- called risk-based-pricing can allow you to do the same, easily introducing a spectrum of options all under the same core brand and model. As we all know by now, OB requires banks to share their line-by-line detailed customer statement data with other
The granularity of open banking data allows you to offer borrowers a bespoke interest rate and term, and do it automatically in seconds. “ ”
10 | Metrics Monthly
July 2019 | UK Edition
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