Bringing together open banking and credit data

NestEgg is bringing together open banking and credit data. To help us we’ve secured a grant from Innovate UK’s Transformative Technologies competition.

As a result, we’ll be developing new features, combining open banking and credit data for rounder, more complete affordability decisions. 

It’s hard to get a fair priced loan

People who’ve been through a rough patch during Covid or the cost of living crisis, are more likely to be turned down for a loan.

“Before joining my credit union I took out a guarantor loan, but it ruined my credit file,” says Christina – a member of Central Liverpool Credit Union. “The interest rate and payments were so high. Because I didn’t want my credit score to get any worse, I did everything I could to repay the loan. But this meant that I’d skipped on other bills – like water, gas and electricity. Because of that, my credit score fell anyway, at least, until I joined the Credit Union.”

Traditional ways of assessing credit are failing people like Christina. Often this is because the data used by lenders doesn’t really reflect the life experiences of us, as individuals. Christina has always repaid her loans. But most lenders turn her away because of this one mistake. A mistake that will be on her credit report for six years.

In fact, the Financial Conduct Authority found that insufficient credit information leads lenders to make decisions that don’t reflect an individual’s financial circumstances. As a result, people are more likely to have access to credit they can’t pay back or denied credit they could afford.

Fairer lending decisions

Funding from Innovate UK is enabling NestEgg to make even fairer credit decisions. By using artificial intelligence (and machine learning in particular) we’re bringing together open banking and credit data, so that lending decisions are more accurately based on an individual’s unique circumstances.

Critically, this isn’t a black box. NestEgg’s decision engine balances the risks of automation to ensure continued transparency in how decisioning algorithms work. In fact, we provide tips and advice to help people get accepted for loans. NestEgg makes the algorithm work for applicants, not against them.

Improved affordability assessment

NestEgg will be conducting a series of experiments over the summer to enhance affordability assessment.

For example, we’ll be analysing whether an applicant’s low current account balance indicates reliance on credit for day-to-day expenses. Eventually, when their line of credit is exhausted, a borrower may struggle to cover living expenses with their income. As a result, credit repayments are missed.

An alert, such as when the current balance remains below £50 for more than 15 days in a month may be useful. However, by combining credit data and open banking information, a more comprehensive view of affordability can be achieved. For instance, a secondary alert could be triggered if credit card balances exceed 50% of their limits.

Uncovering novel insights and correlations within data

Machine learning, a subset of artificial intelligence (AI), involves developing algorithms and statistical models that enables automated decisioning systems to learn and improve from data without explicit programming.

Given the vastness of data sets, humans cannot fully consider how data supports lending decisions, despite Loans Officers’ extensive experience. Machine learning analyses vast data points from credit bureau and Open Banking, generating rules to adapt to market changes and regulations.

By utilising machine learning, NestEgg can make faster and more accurate lending decisions, ensuring fairer outcomes for borrowers.

This supports the regulator’s remedies for failures in the credit marketing. The FCA stated:

“The use of a wider variety of data and more sophisticated analytical techniques indecision making should increase the overall quality of lending decisions, as lenders are able to offer consumers credit products on the most appropriate terms.”

Next steps

Discover how NestEgg’s innovative use of open banking, credit data, and machine learning is revolutionising lending decisions. Contact us for a demo. Join us and create a more inclusive and accessible credit market for everyone.

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Adrian Davies

Adrian is a co-founder at NestEgg. He is an alternative finance and credit union expert. Adrian has 25 years’ experience in the money advice and responsible lending sectors, supporting credit unions with innovative ideas so they can grow and meet member needs.

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