Metrics Monthly | September 2020 | AU Edition

Metrics M onthly September 2020 | AU EDITION


As the Covid-19 Mortgage Holiday draws to a close, what’s next for the mortgage industry?

In this issue Welcome Page 03

In the news Page 04

The future of forbearance Page 06

19,000 votes counted Page 08

Regulators must act now Page 10

Case study Page 12

The ADP Landscape Page 14

Auto Decision Platform Page 15

Auto Decision Platform

02 | Metrics Monthly

September 2020 | AU Edition

Decision Platform (ADP) saves on time, , driving more profits to your bottom line.



Welcome to another compelling issue of Metrics Monthly! With restrictions across Austral- ia putting a lot of things on hold, the finance industry world is still revolving, and this month’s newsletter looks at recent awards, Fintech inquiries and the collapse of rent-to-own retailer BrightHouse. Our ‘in the news’ section looks at the recent inquiry by the Australian Senate Committee into Fintech providers and its recommendations to drive compe - tition in the sector. We’re also show - casing the new Nesta challenge which offers A$4.9m to support solutions that can help people access financial assis - tance or access affordable credit during this difficult time. Our feature piece this month follows on from our May article about how mortgage lenders have been recog - nised extensively for the fantastic work they are doing to process millions of

payment holiday requests. As the 6 month Mortgage Holiday scheme in the UK draws to a close, we ask “what’s next for the mortgage industry? ” and look at the recent FCA guidance which aims to ensure firms provide tailored support to mortgage borrowers who continue to face financial difficulties. Amidst the negativity in the media this month, we have some good news to share, as the results of 19,000 consum- er votes are counted and LendingMet - rics is recognised for our outstanding work with our partners. Our featured thinkpiece this month is by CEO David Wylie, who says the col - lapse of BrightHouse and others, plus an ongoing tidal wave of compensation claims, should act as a wake-up call to the regulator on page 10. If you haven’t subscribed to Metrics Monthly yet, make sure you head to our website to sign up and receive monthly editions straight to your inbox.

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Metrics Monthly | 03 Our online Auto Decision Platform (ADP) saves on time, money and errors, driving more profits to your bottom line. ADP assesses your applicants in real-time, 24 hours a day, and delivers consistent and accurate lending decisions in milliseconds.

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In the news

Australian Fintech inquiry calls for reform The Australian Senate Committee recently launched an inquiry into Fintech providers, and has suggest- ed 32 recommendations that aim to promote competition in the sector. The recommendations have particular focus on regulatory reforms, with key issues identified relating to taxation. The inquiry found evidence that the regulators are not properly organised to drive competition, particularly with the larger banks. The report states: ‘the number of regulators with a role in relation to competition and financial services in Australia mean that it is not straightforward to ensure that com - petition is operating effectively in this sector’. The report claims that this lack of com -

petition is a risk and requires regulators to become involved in order to collec - tively provide greater focus on promot - ing financial competition. Whilst the Australian Government took a positive step toward Open Banking through the Consumer Data Right Act, which saw Austalian consum - ers choosing to share their banking data with third party providers, inquiry leader Drew Bragg claims this is not enough. ‘Our Inquiry recommends a new national body to deliver the Con - sumer Data Right. It is too important to be a unit in the Australian Competition and Consumer Commission (ACCC). It needs focus and accountability and the capacity to run a public information campaign’, said Bragg.

Nesta launches A$4.9m Rapid Recovery Challenge Innovation foundation Nesta has launched a A$4.9 million challenge called the Rapid Recovery Challenge to support solutions that will improve access to jobs and money for people hit hardest by the Covid-19 economic downturn in the UK. the greatest potential to help people access financial assistance, manage their cash flow or access affordable credit.

Ravi Gurumurthy, Chief Executive of Nesta, said: “COVID-19 has created a huge economic shock. Millions face severe threats to their job security and household finances, and we know that low-paid workers, people in insecure roles and those under 25 will be hit hardest. I’m looking forward to seeing the range of solutions innovators develop to address these issues and support those whose jobs and financ - es have been most impacted by the pandemic.” Entries for the challenge are now open and close on the 26 October. To find out more about the Rapid Recovery Challenge click here.

Nesta’s own research of those in low paid or insecure work shows that, nearly a third of those surveyed (32%) believe that a second UK country-wide lockdown would send them over the edge financially. In order to attempt to support these people, the Rapid Recov- ery Challenge aims to find Fintechs, charities and other organisations that address the challenges faced by these people. The challenge requires organisations to enter their solutions in a bid to win up to A$844,000 of backing. The most promising solutions will have

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September 2020 | AU Edition

Three new faces in the LendingMetrics office We are pleased to announce the appointment of three new members of the team.

The first of these, Adam Hill, joins the team as a Senior Developer and brings a wealth of experience in software design. Adam’s skills in development aren’t just limited to the workplace; his innovative game Hot Shots won the Intel App Inno - vation Contest in 2013. He joined the company whilst some members of his team were working remotely due to the pandemic, but luckily LendingMetrics staff are now very well versed in video conferencing and communicating effectively whilst working from home, meaning Adam was able to quickly hit the ground running with working on research and development for our mul - ti-award-winning Auto Decision Plat - form (ADP). Nizam Ullah joined the team as our new Finance Manager, and will be taking the lead on finance management for the business. Nizam brings over 10 years of experience to the role, and is also a member of the Chartered Institute of Management Accountants. Finally, Ashok Davuluri joined the company as a Developer with over 6 years of experience with full-stack .NET development. Nizam and Ashok join the team at our new office space in White - ley, and after a busy week of induction activities are both looking forward to their new roles.

About the new appointments, Head of Operations Paul Brown said: “We’re thrilled to welcome three new starters to the company this month, and pleased that, in these difficult times when many industries are struggling, LendingMet - rics, as a nimble and reactive Fintech,

has remained stable. As a result, we are able to continue our substantial rate of growth as a business, with more excit - ing additions to the team soon to come.” To connect with our new teammembers on Linkedin, click on their profiles below.

Senior Developer Adam Hill

Finance Manager Nizam Ullah

Developer Ashok Davuluri

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Metrics Monthly | 05

The future of forbearance In May we released an article about how mortgage lenders across the country have been recognised extensively for the fantastic work they are doing to process millions of payment holiday requests. The COVID-19 Mortgage Holiday scheme allowed borrowers to request a payment break or reduced monthly payments, and was extended from 3 months to 6, resulting in huge volumes of requests.

Whilst these forbearance requests pro - videdmuch needed reassurance for the many people struggling due to redun- dancies and failing industries, lenders expressed concern that the mortgage payment holidays would only delay the inevitable for too many customers. Although the majority of customers would most likely resume repayment as normal, many could remain in finan - cial difficulty, with the potential for a swathe of mortgage defaults hitting later in the year. This could potentially delay a recovery in the finance indus - try as cash flow is dented, prevent - ing new loans from being granted. The question arose: “What does the future hold for the mortgage indus- try?”. Recently, the Financial Conduct Authority (FCA) has made a step towards answering this question, by announcing proposals to ensure that firms provide tailored support to mort - gage borrowers who continue to face difficulties with their repayments as a result of the pandemic. The guidance aims to ensure cus- tomers receive the support they need, whether they requested payment deferrals at the start of the pandemic

and continue to face financial difficul - ties or their financial situation is newly affected after the current guidance ends, which will be on 31 October. The new, draft guidance proposes that firms consider the appropriateness of a range of short and long-term support options, directly related to the specific circumstances of the customer. This, however, would require many lenders to find better processes that allow them to assess actual affordability, based on up-to-date details. Lending - Metrics’ OpenBankVision (OBV) does exactly this, providing fully verified, cat - egorised and machine-readable Open Banking data, instantly. Many lenders already adopted OBV when the flurry of mortgage holiday requests started pouring in, so as to avoidmanual forbearance processes or a “yes to all” scenario. Others embraced OBV after the 3 month payment holiday extension was announced, in order to utilise its simple ‘Refresh’ option to repeatedly retrieve the latest real-time data and enable regular reassessment of income and affordability as borrow - ers’ circumstances changed. Now, with the FCA urging firms to prioritise giving

tailored support to borrowers who face the greatest financial difficulties, being able to make better and more informed decisions by seeing a customer’s indi - vidual circumstances first-hand is more important than ever. FCA Interim Chief Executive Christo - pher Woolard notes that borrowers facing financial difficulties due to the pandemic will continue to face uncer - tainty or may experience temporary interruptions to their income, so a firm’s ability to view categorised bank state - ment data instantly with OBV would allow them to best assess borrowers affordability on a case-by-case basis. Woolard states that this is the core message of their guidance: “We are proposing that firms contact their bor - rowers in good time before the end of a payment holiday, and work with them to come up with a tailored plan to help get them back on track. Firms should not take a ‘one size fits all’ approach.” By adopting OBV, lenders can conduct this tailored approach easily and in real-time. The full FCA guidance can be read here.

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Metrics Monthly | 07

19,000 votes counted

LendingMetrics voted “Technology Partner of the Year 2020” at the Consumer Credit Awards

LendingMetrics are delighted to announce that we have been named “Technology Partner of the Year” at the Consumer Credit Awards 2020. The awards are voted for, not judged, and comprised of a 12-week voting process incorporating a total of over 19,000 votes across 120 Fintech com - panies. This marks the second year running in which LendingMetrics has won at the Consumer Credit Awards, with 2019 seeing us lift the “Innovation of the Year” award. The technology partner category is par- ticularly hard fought, and the competi- tion was therefore of a very high calibre. LendingMetrics would like to congratu - late the worthy contenders Provenir and Equiniti Credit Services for doing so well in getting to the finals. The award entry centred on Lending -

Metrics’ Auto Decision Platform (ADP), the “go-to” solution for enterprise auto - mated credit decisioning. ADP is openly connected to all of the major credit ref - erence agencies, IDV and KYC suppli - ers as well as Open Banking. Its unique logic editor allows users to design, test and deploy credit policy instantly in a “no code” environment, meaning credit risk and operational colleagues can execute changes without internal IT expertise being required. In addition, ADP is deliv - ered via a private cloud environment and is a fully hosted SaaS solution. Commenting on the news, David Wylie (Commercial Director at LendingMet - rics) said ‘We are absolutely thrilled to have been recognised in this way by so many of our customers and con- nections voting for us. Over the past 10 years LendingMetrics has built an enviable reputation for being a positive -

ly disruptive force in the Fintech sector and we have been rewarded for this by seeing so many companies, large and small, public and private, putting their trust in us to help them deliver on their ambitions. We want to thank everyone who voted for us and for their continued support as we continuously strive to be the best technology partner we can be!’ The news coincides with the results of our recent “Go Live” survey, in which we asked clients about their experience of the implementation process of ADP. The results were highly positive, with LendingMetrics scoring a fantastic 9.5 out of 10 for 50% of the questions, and feedback praising the responsiveness of the team and the support of the Project Managers. Generally, clients were very pleased with the implemen - tation process, with deadlines met fully and the process going smoothly.

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September 2020 | AU Edition

LendingMetrics is ever striving to improve, and offer the best service possible, so we also asked clients for feedback regarding improvements. The comments were highly construc - tive and all suggestions will be includ - ed in our future planning process. By frequently inviting feedback and com - ments, through surveys and individual consultations, LendingMetrics is able to

support clients, identify any roadblocks and improve our services on a continu - ous basis. This attentiveness and reac - tivity is likely to be the reason behind so many of our clients and partners voting for us for the ‘Technology Partner of the Year’ award, whom we want to thank for their support. The full scores from the survey can be seen below.

[The] experience has been excel- lent and the im- provements that have happened with the videos etc are great and have enabled me to be able to cross train the system to others very easily. The visual nature of the product has helped deliver to the non tech side. - Client feedback

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Metrics Monthly | 09

Regulators must act now David Wylie says the collapse of BrightHouse and others, plus an ongoing tidal wave of compensation claims, should act as a wake-up call to the regulator. It can’t sit on the fence any longer.

Rent-to-own retailer BrightHouse called in administrators earlier this year under the weight of an avalanche of compensation claims. It had been forced by the regulator to pay A$26.3m to customers who had signed-up to ‘unaffordable’ loans, and to those who had cancelled agree- ments after one down payment. The firm called in administrators after it realised this payout was not going to

draw a line under the matter, and that there would be more claims to come. Its collapse followed on from that of payday loan giant Wonga, QuickQuid, 247Moneybox, PiggyBank and WageDay Advance. What hobbled these lenders, and con- cerns others who still want to operate profitably in this space, is that unless the regulator comes up with a crite-

ria for a ‘valid claim’ - rather than its ‘anything goes’ stance - it is difficult to meaningfully plan for a viable future. How can anyone in this industry do that when you have a giant unknown liability hanging over your head? If the regulator refuses to admit that there should be a cost to making a false claim, then there is no real limit to the number that will be received by lenders. No one minds having to com-

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September 2020 | AU Edition

pensate those who have really been mis sold, because they should only amount to a manageable and small proportion of the lending book of any well-run lender. What can’t be tolerated is having to deal with tens of thousands of claims that have no chance of going any- where, but which are made because there is no cost to failure and every chance that the lender may settle. Concern about just what the regulator is up to is understandable, given that many fear the claims chasing industry, grown fat on PPI, is now looking for new targets. Over the past 10 years such compa- nies have perfected a cynical business model that plays the system. They know lenders will often not have all the historical documentation necessary to prove categorically a product was cor- rectly sold, and that this is going to be the case with small value loans. They also know that each claim for- warded to the Financial Ombudsman Service costs the lender a standard A$977 fee, plus the considerable man- power cost involved in processing. And that because lenders are set time- frames by the regulator to clear cases they are often willing to settle, just to get claims off their radar. Basically, there has been no downside

for either the claims chasers or the claimants because there has been no cost for making a spurious or false claim. As Barclays finance director Tushar Morzaria admitted last year, claims companies had been ‘swamping the bank with vexatious claims’. Unless the regulator acknowledges this and does something soon in the area of defining the general outlines of what constitutes a valid claim, there are going to be an awful lot of lenders out there wondering whether it is worth remaining in the market. They all know about the seemingly endless PPI compensation payments that have been made by UK banks - A$69 billion so far, and counting. And they fear the same carpet bombing of daytime TV adverts suggesting to con- sumers that they’d be mad not to make a claim against the provider of their consumer loan, credit card, etc. Companies whose lending book con- sists substantially of smaller loans of under A$1,777 know that this scenario would be disastrous. I know one such lender who told me that claims were already costing them A$53,000 per month. They were getting cases in batches of 200-or-so from one claims company that was acting in the same manner as pack-

agers used to in the mortgage market. They suggest that much of the claims process is automated and that com- plaint leads are bought from data platforms. Tellingly, they point to the number of cases against his company that have gone to the Ombudsman, of which only 6% have been upheld. They are certain - as I am - that if there is no regulatory or Government action on this, we are looking at the departure of more lenders from the market eager to avoid being the victim of a tsunami of claims that really do not have any merit. What is needed swiftly is a change to the ‘heads-you-win, tails-I-lose’ claims environment that in essence encour- ages fraud. Is this too much to expect this from the regulator?

Above: LendingMetrics Commercial Director and co-founder David Wylie

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Metrics Monthly | 11

Case study Ethical lender Fair Finance automate decisioning with ADP

LendingMetrics and Fair Finance had already been in contact for a number of years, developing a strong relationship based on a mutual interest in the devel - oping technologies within the lending markets. As with many other lenders, Fair Finance were using a completely manual underwriting process and were interested in learning more about the different options available to update this process. As LendingMetrics have a range of products, including their Auto Decision Platform (ADP), and Open Banking product OBV, they were able to demonstrate how they could support Fair Finance with their mission in a number of different scenarios, earning their trust as experts in this field. Many businesses are conscious that automating processes may result in a journey or experience being dehuman - ised for the end customer and a threat to staff morale with the fear of job

losses, and this was particularly impor - tant to Fair Finance as a socially con - scious business. LendingMetrics were able to show that automation can be used to simplify the parts of the process that involve black and white decisions, leaving the underwriting team to review the results for rules that might still need a human’s touch. After taking some time to discuss inter - nal priorities and taking into consider - ation the advice and consultation pro - vided, Fair Finance decided that they wanted to progress with implementing a software solution to support their decision making. Due to the importance of this decision, Fair Finance adopted a thorough tender process, using an external consultancy firm to perform an option analysis on the various providers with whom they had engaged. Lend - ingMetrics were delighted to be select - ed, following the tender process, and

Fair Finance offers a range of financial products and services designed to meet the needs of people who are financially excluded. Their mission is to design and deliver financial services that improve financial wellbeing and have a positive Fair Finance recognised that in order to continue their success, they needed to improve the consistency and quality of their underwriting and decisioning. They were keen to find technology that would enable them to automate the process, but also provide them with a future-proofed system that allowed for ongoing decisioning changes and new third party data suppliers. impact on their clients. Choosing LendingMetrics

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September 2020 | AU Edition

project plan, spanning across 4 inde - pendent phases, led by a client dedicat - ed Project Manager. The initial phase of every ADP imple - mentation project is to ensure that all requirements have been gathered from the client, the most important of which is the design of the decision engine that will be delivered. LendingMetrics were heavily involved in this part of the process and maintained a strong line of communication with the team at Fair Finance to provide consultation and guidance on how best to design the various rules and decisions that made up their engine. Fair Finance felt confident in the project team from the initial sales conversa - tions through to delivery andwere happy with the results of the consultation pro - vided throughout the project. As a rela - tively small business, Fair Finance were pleased to find a company that was experienced in dealing with all sizes of businesses and that they weren’t over - looked in favour of larger companies. Result Having completed the implementa - tion of ADP, the first benefit that Fair Finance noticed was the significant improvement in efficiency thanks to the streamlined decisioning process. They no longer need to keep multiple spread - sheets updated; the only systems they now need to use are ADP and their inter - nal CRM system, which has meant a much cleaner and simpler process that their underwriting teams “love”. As well as the immediate benefits of

moving to an automated decision - ing tool, Fair Finance were impressed with the scalability and adaptability of ADP. With a strong focus on continued research and development, the platform is always improving and client feedback is an important part of this process.

quickly set about analysing the current underwriting model in readiness to support Fair Finance in the implemen - tation project. When designing their decision engine, Fair Finance’s main aimwas to replicate their existing underwriting process, but with some small improvements, par - ticularly around automating the decline decisions. Fair Finance’s future plans include rolling out a new strategy that includes scorecards, something which they believe would have been really challenging and cumbersome without using ADP. Approach for delivery The implementation process followed LendingMetrics’ well-established Guillaume Foucaud, Chief Operating Officer of Fair Finance, said: ADP has brought immedi- ate benefits by streamlin - ing our decision process. It is also providing us with a scalable platform to deploy new decision- ing approaches such as more complex application scorecards and using al- ternative data sources. We are very pleased we made the decision to work with LendingMetrics. “ ”

It was great to work with Fair Finance as they set out on their journey towards a more simpli- fied and consist - ent underwriting process. We look forward to con- tinuing our part- nership over the coming years. Neil Williams Managing Director of LendingMetrics

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Metrics Monthly | 13

The ADP Landscape ADP is a multifaceted, multi-award-winning program, with countless possibilities once deployed. But how does it work? Watch our video below to find out.

Frequently Asked Questions What if I want to retain that human touch to my underwriting? The degree of automation is totally within your control. You can provide fully binding decisions or simply an approval in principle. You can even give binding answers to people above a certain credit threshold and an AIP to others requir - ing more in-depth investigation. The choice is yours. Isn’t this type of software expensive?

Why is ADP different to other credit decisioning products? Unlike nearly every other product out there, ADP puts you in total control of changes to your decisioning; how you want to change it and when you change it. No more lengthy IT delays and no more charges for technical changes. The simple UI enables your operational staff/credit-risk officers to make changes at a user level (subject to permissions). Can I use ADP for champion/ challenge and retro analysis? ADP has several novel and unique tools to enable real time “what-if” and “champion/challenge” of your client’s data. This enables your business to test several possible improvements to your credit policy all at once, without impacting on your live lending activities.

Generally yes! However, ADP by LendingMetrics is a posi - tively disruptive force in the market and prices are tailored to your business. Affordable entry level pricing right up to enterprise. Put it this way: we think you’ll be pleasantly sur - prised when we show you what you get for your money.

14 | Metrics Monthly

September 2020 | AU Edition

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