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Using Open Banking to lend responsibly in uncertain times

Learn how you can harness open banking data to understand borrowers better in a rapidly changing world.

by Avishek Chowdhury3rd July 2020

Unprecedented economic circumstances have altered the landscape of lending, making it impossible for lenders to continue business as usual while still relying on traditional credit bureau data.

The impact of these changes means:

∙ Existing methods to identify creditworthy borrowers are unreliable.

∙ Affordability assessments may be using out-of-date data.

∙ Past behaviour and repayments are less predictive of future circumstances.

An increasing number of lenders are now embracing new data sources and technologies to help understand borrowers in a rapidly changing world. To continue issuing loans during these uncertain times, the brokers and lenders are now relying on transaction data available through Open Banking. It is because Open Banking provides a reliable, timely, and compliant way of accessing transaction data for credit risk and affordability assessments.

Accessing Open Banking data through our platform eliminates three critical problems faced by the lenders –

Detecting recent loss or significant change in income

With many people experiencing total or partial loss of income, customers' ability to repay credit may be impacted significantly. Our Recent Income Shock Indicator helps you to accurately detect and account for the recent loss of income by supplying a verifiable income prediction and income shock data.

Identifying new borrowing behaviour before the traditional bureaus report it

You will have access to data related to recent loans received and missed payments through our Recent Borrowing Indicator. You can get information on recent borrowing, including the number and total value of loans the applicant has taken out in the last 30 days and 3 months. This feature provides a critical updated view of a customer's credit commitments, which would take 30-90 days to surface on a traditional credit report.

Lack of information around recent borrower distress

We analyse and interpret changes in financial behaviour with our Risk Insights View. It is designed to bring you everything you need to assess risk into one easy-to-use screen. The feature presents key financial behaviour indicators such as time spent in unarranged overdrafts, predicted gambling spend, returned direct debits and use of different types of credit, using a simple traffic light system to highlight the behaviours that need investigation. You can also deep dive into trends in the behaviour over the last year and all transactions relevant to the behaviour.

You can also identify key workers through our Employer Industry Indicator feature where income sources are labelled with their Employment Industry. This enables you to identify one of 18 key industries. Employer names also surface wherever possible.

There are millions of people who still want to borrow, and whose financial circumstances haven't changed enough to render them too risky or unable to afford credit. Jointly authorised as both an Open Banking AISP and Credit Reference Agency, Credit Kudos is uniquely placed to help lenders de-risk a return to the market. We have been collecting loan repayment outcomes since 2015 and have a wealth of experience modelling default risk using data available through Open Banking. Get in touch with us today to discuss how we can help!