Appropriate checks will of course take place to ensure that the consumer is creditworthy: that they don’t have CCJs or IVAs, are not bankrupt and won’t be late with their payments. Nevertheless, this does not guarantee that they can realistically afford the loan. So, how can a lender make a confident decision based on both creditworthiness and affordability? There are two options. The first is to build a system that can see into the future: the creditworthy crystal ball! The second and, let’s face it, much more realistic option is to use as much data as possible to make an informed decision. Affordability has and always will be a hot topic for regulators and lenders. Whilst regulators do not explicitly pre- scribe which checks lenders should and shouldn’t carry out, they do expect that the checks completed are appropriate for both the lender and consumer. This means that there could be errors due to differing interpretations. According to the Financial Ombudsman Service, there has been a 130% increase in consumer complaints relating to claims of mis-selling due to affordabil- ity. This has been a major contributory factor in well-known Payday lending companies such as Wonga, QuickQuid and the Money Shop going into admin- istration. Lenders are having to change their business models accordingly as these complaints are causing issues within their business operations. One emerging problem is insurance: due to the increased amount of complaints, lenders are finding it more and more difficult to get appropriate cover. Either their insurance premiums are becom- ing unaffordable or the insurance poli- cies will not cover the company. Whilst there have been examples of lenders not completing the appropri- ate risk checks on consumers’ applica- tions, there are many companies that are doing it well but still feeling the neg-
ative impact. The question, then, is how do lenders ensure they are using the appropriate amount of data to accu- rately assess affordability alongside creditworthiness? Lenders are increasingly using Open Banking to be able to verify the infor- mation provided by the consumer and gather the required data. Prior to Open Banking, making a decision based on a consumer’s bank statement data was a long, drawn-out process and had an impact on the consumer journey, often resulting in a loss of business for the lender. You may remember the piece in our October issue of Metrics Monthly “Don’t Thomas Cook It”, in which we looked at how the consumer journey can affect businesses, and how time and speed are top of the priority list. The custom- er experience steers their spending habits, and this is one of the potential downfalls that led to the Thomas Cook collapse at the end of last year. But how do lenders find the right balance between ensuring that they are as dil- igent as possible whilst also prevent- ing customers from going elsewhere due to a poor consumer journey? On one hand, lenders will want to keep costs low, but on the other hand they’ll want to provide a fast and convenient process in order to avoid consumers jumping ship, much like they did when Thomas Cook didn’t change with the times or do enough to compete with online sites. This is where OpenBankVision (OBV) from LendingMetrics comes in to its own. We launched the revolutionary Open Banking platform at the start of 2019 with a simple message: “100% free, forever”. This has not and will not change. OBV has enhanced the consumer journeys of many lenders, allowing them to make quick and informed decisions based on facts and evidence. OBV benefits from years of
LendingMetrics experience of categori- sation and consumer spending habits. Whilst we cannot see into the future, the detailed reports produced by OBV ensure that lenders can understand how the consumer manages their money, and thus make better decisions based on affordability as well as cred- itworthiness. It allows lenders to see salary income, expenditure, dispos- able income, and more, all in real time. This helps lenders to understand if the consumer can afford the loan and how they will afford to pay it back. Our clients have given excellent feed- back on our OBV platform, especial- ly regarding the impact it has had on their businesses. Lenders have been able to increase their diligence and speed up their origination process, with some reducing their decision times from a number of days to a number of seconds. OBV can be used as a standalone or integrated platform and almost all LendingMetrics’ Auto Deci- sion Platform clients are using OBV as part of their automated processes. There may be no such thing as a cred- itworthy crystal ball, but OBV can trans- form the way you assess a consumer’s affordability, and help you make better, more informed lending decisions. Oh, and did we mention, it’s 100% free, forever!
Above: Head of Operations Paul Brown
+44 (0) 2394 211010 | www.lendingmetrics.com
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