Credit union referrals are central to the Financial Inclusion Strategy

The UK Government’s recently published Financial Inclusion Strategy highlights a continuing challenge for the financial services sector:

“The provision of affordable credit to financially excluded people is a challenge that the financial services sector as a whole must rise to meet.”

The strategy makes clear that mainstream lenders, like banks, and community finance providers, like credit unions must work more closely to support the millions of people currently excluded from affordable credit.

NestEgg’s Broker Platform is designed to facilitate this collaboration. The Financial Conduct Authority recognised the platform with a TechSprint Fast Solution award for its ability to quickly and securely connect declined applicants to appropriate community finance options. The Financial Inclusion Strategy reinforces the need for such approaches, noting that:

“The government is encouraged to see greater partnerships developing between the community finance sector and mainstream lenders and wants to see these continue to make progress.”

Why referrals matter

Evidence from the Financial Inclusion Strategy and NestEgg’s forthcoming white paper highlights the scale of unmet need. In the two years to May 2024:

• 15.3 million adults applied for credit, with 22% declined.
• An additional 5.5 million people did not apply, often due to concerns about rejection or unsuitable products.
• 300,000 adults borrowed from illegal money lenders, while a further 1 million relied on high-cost credit.

As the Financial Inclusion Strategy notes:

“If consumers are not able to access products from a regulated firm, they can be forced to cut back on essential spending or to turn to an unauthorised lender.”

Credit unions play a critical role in reducing these risks through higher acceptance rates, fair pricing, and wrap-around financial inclusion services. For housing associations, ensuring tenants can access regulated, affordable credit is central to supporting financial stability and sustaining tenancies.

Inclusive impact

NestEgg estimates that the unmet demand highlighted in the Financial Inclusion Strategy could translate into £750 million of annual loan demand for credit unions. With typical acceptance rates of around 70%, this would generate approximately £80 million in annual loan interest for the community finance sector. Most importantly the savings borrowers could make compared to using high-cost credit would be over £160 million.

Interviews with credit union members show a clear pattern: borrowers prioritise financial stability over the loan itself. They see borrowing as a practical step toward long-term security. As a result, many credit unions offer Save as You Borrow schemes that help members build savings at the same time as repaying their loan. After five years of membership, borrowers typically hold 50p in savings for every £1 borrowed, with 70% of those savings accumulated by people living in the top 20% most deprived neighbourhoods.

This approach strengthens household resilience. An outcome directly aligned with priorities across the housing sector, where sustained financial stability supports tenancy sustainment and reduces the risk of arrears.

Options for referrals

NestEgg provides a range of referral approaches to support organisations at different levels of digital maturity:

• Post-decline email – a simple option requiring no integration. Decline notifications include a link to NestEgg, enabling fast deployment and trackable referrals without data sharing.
• Campaign referrals – enables organisations to reach targeted credit score ranges with tailored messaging. This low-effort, high-acceptance approach requires no integration and allows experimentation with different customer groups.
• Branch referrals – staff can refer declined applicants directly, with their consent. This option leverages existing relationships, requires minimal setup, and involves only limited data sharing.
• Embedded referral – a fully integrated, in-journey experience offering the highest conversion rates and most precise referrals.

Each route provides a pathway toward more advanced referral capability, making it straightforward for organisations to expand financial inclusion activity at a pace that suits their operational and technical capacity.

Working in partnership

For NestEgg, the Financial Inclusion Strategy validates everything we’ve built. NestEgg’s platform is designed to enable seamless and responsible referrals. While our Decision Engine helps credit unions modernise their lending technology and our Loan Matching service helps ensure borrowers are connected to regulated, affordable credit options designed to serve them. Our machine learning tools further support this by ensuring vulnerable customers receive appropriate support throughout.

The government’s Financial Inclusion Strategy has now made clear this isn’t just good practice; it’s expected practice. If you’re a bank looking to build referral partnerships that meet the Financial Inclusion Strategy’s objectives, get in touch. We can support your inclusion goals in this new era of government-backed collaboration.