NestEgg joins the Financial Regulation Innovation Lab Consumer Duty Challenge

We’re thrilled to be part of the Financial Regulation Innovation Lab’s Consumer Duty Challenge. On 5 November, we joined other participants, industry partners, and experts in Glasgow to explore innovative solutions to address issues affecting both large and small financial institutions. The shared focus and fresh approaches revealed during the event were inspiring, providing valuable insights into better serving vulnerable consumers.

NestEgg’s approach

NestEgg’s Broker Platform steps in when traditional financial institutions, such as banks, and other problem spotters are unable to serve applicants, especially those who may be at risk of financial vulnerability.

Through our platform, applications declined by traditional lenders are automatically assessed and redirected to the credit union most likely to accept them. The platform provides access to a unique data set because NestEgg helps lenders decision one loan from a vulnerable person every minute. This aggregated, anonymised data is invaluable for developing a Consumer Duty strategy that prioritises the needs of vulnerable consumers. Additionally, all data is securely managed under ISO27001 controls, meeting the latest 2022 standards.

To date, these insights have helped responsible lenders better assess credit risk. However, our hypothesis is that this data can go further by identifying characteristics of vulnerability itself. By understanding these traits, we can create targeted interventions to improve consumer outcomes.

Identifying vulnerable customers

Our next steps involve further segmenting borrowers by leveraging data from the Indices of Multiple Deprivation, alongside indicators like age, income, and credit score. We are also exploring a new vulnerability indicator that could evaluate additional data sources, including Open Banking and credit bureau data. The use of credit products, such as Buy Now Pay Later, will also be considered in this evaluation.

This work will lead to a ‘vulnerability dashboard.’ This would become a unique tool for NestEgg, our partner lenders, and organisations using our Broker Platform. This dashboard will provide a comprehensive view of consumer vulnerability at the portfolio level, supporting informed decision-making.

Fairer pricing for vulnerable consumers

Current credit risk models may misinterpret indicators of vulnerability (such as low income) as heightened risk of non-repayment. This can result in unfair pricing or outright denial of credit, worsening financial outcomes for vulnerable individuals. By refining risk models to distinguish between vulnerability markers and true credit risk, lenders can offer fairer pricing that better aligns with each consumer’s actual financial situation. Notably, this includes creating more appropriate paths for declined applicants, where the most vulnerable often find themselves.

Improved consumer outcomes

The Consumer Duty Challenge offers an opportunity for NestEgg to support lenders in achieving better outcomes for vulnerable consumers:

• Consumer understanding: Through advanced data visualisations and Machine Learning, we will deepen our understanding of the needs of vulnerable customers, especially those seeking smaller loans.
• Price and value: By differentiating between risk from vulnerability and genuine repayment risk, lenders can ensure fair pricing, delivering better value to consumers.
• Products and services: When traditional lenders cannot offer suitable products, they can confidently refer consumers to the NestEgg platform. Our partner lenders, backed by data insights, provide products tailored to the needs of vulnerable groups.
• Consumer support: Vulnerable consumers will have improved access to support, making it easier for them to select appropriate financial products. NestEgg will use these insights to enhance online touchpoints, nudging consumers toward the right products and services.

Join us on the journey

We’re excited to see how our work in the Financial Regulation Innovation Lab’s Consumer Duty Challenge can lead to meaningful change for financially vulnerable individuals. If you’re interested in collaborating or learning more about our work, please get in touch with us.

Together, we can drive responsible lending practices and support better consumer outcomes across the financial sector.