Recently our Head of Product, Angus, joined Innovate Finance to speak on Financial Inclusion and how Fintechs are helping to advance this. We sat down and asked him a few questions...
Welcome, Angus. Can you tell us a little bit about your role and your work at Credit Kudos?
I’m Angus Clacher, the Head of Product at Credit Kudos. We are an Open Banking credit reference agency - OB CRA for short - and our mission is to provide fairer credit for all through innovative technology.
At Credit Kudos, we have over 100 lending clients including blue chips such as Admiral and Hastings. And, innovative new firms including Atom bank the neobank, Cazoo the car people and Zilch the Buy Now, Pay Later provider. These clients all leverage our Open Banking data and CRA services to make better and faster credit decisions.
What does financial inclusion mean to you?
For me - financial inclusion is enabling everyone in society to have the opportunity to access financial services equally. The ability to earn and demonstrate a real livable wage is imperative in being able to do this. Low hourly pay, poorly organised shifts and zero-hour contracts, all make it difficult for a lot of hard-working people to earn and demonstrate a predictable income, especially in the cash and gig economy.
Why is this important?
A fifth of UK adults have less than £100 in savings - reliance on access to credit is not a matter of ‘if’, but ‘when’. Financial flexibility through affordable credit options helps many mitigate unexpected costs, and alleviate financial pressures.
Currently, due to insufficient data, many of the people who need to borrow money most are often the ones that have the hardest time accessing affordable credit. With traditional methods of assessing affordability and creditworthiness relying on historical credit history - there is a large number of people in the UK with thin or no credit history that are unable to access fair and affordable credit options.
With customers' consent, our Open Banking platform retrieves transaction data from a borrower’s bank and other financial institutions. We then aggregate and interpret those transactions, providing lenders with comprehensive insights, scores and features to more accurately assess the application. This enables lenders to make better lending decisions, whilst simultaneously providing a method for previously overlooked individuals to access credit - advancing financial inclusion.
Can you share some examples of Fintechs providing better outcomes for consumers - perhaps examples of financial inclusion or bettering financial wellness?
Absolutely - one of our partners was able to safely increase acceptances by a third using our Open Banking insights. Using richer data, the lender was able to assess applicants more accurately, capturing a more comprehensive view of the applicant’s current financial situation. At the same time, they were also able to halve their default rates - highlighting the greater accuracy provided through our Open Banking insights. Being able to write a third more good loans and half defaults is pretty compelling!
We’ve also got a number of case studies on our website click here.
What are some of the technologies (e.g. Open Banking) that fintechs are using to deliver financial inclusion, and financial wellness?
There are many - these technologies are making it easier for lenders to more accurately assess applicants and streamline their processes to provide a faster decision back to customers and responsibly approve more people.
Using Open Banking technology, lenders are able to:
- Instantly verify income
- Complete accurate affordability assessments
- Detect and prevent fraud
- Leverage Open Banking credit scores to lend to those currently underserved by traditional data.
What is your vision for financial inclusion in the UK, what have we achieved so far and what is left to do?
Here in the UK Open Banking is currently passing the strategic inflection point where we move from the early adopters of the technology to the mainstream and mass-market adoption. In the UK the case is clear for using an Open Banking CRA. With heightened financial insecurity it's imperative that people get access to the financial services they need, including fair and affordable credit. I look forward to more Open Data to accelerate the other consumer financial products including savings and insurance.