Introducing Financial Health Indicators

NestEgg and Central Liverpool Credit Union are one of six finalists in the Affordable Credit Challenge.

Together we are building Financial Health Indicators (FHIs) into NestEgg’s decision engine.

Covering spending, borrowing and saving, FHIs are shared transparently between borrowers and lenders. We believe FHIs are set to transform credit assessment.

A mobile app gives borrowers visibility of the data used to make credit decisions using FHIs. Tips are provided. Applicants improve their credit profile. Lending risk reduces.

Community lenders are having to decline borrowers considered marginally too risky to be offered credit. FHIs are an effective, transparent way to nudge borrowers to make the changes required to be accepted for a loan.

Because of this transformational change, we estimate that borrowers will save £50m interest over the next 2 years. We expect more than 50 credit unions to be using FHIs by 2021.

Social impact is monitored in real time.

Benefits for borrowers and lenders

FHIs show movement from red through amber to green. Borrowers are presented with recommended actions, making it more likely that credit decisions move from ‘no’ to ‘yes’. Then, at an agreed point, a ‘one click’ loan application is sent to a responsible lender. As a result, applicants know their chance of success is high. Borrowers feel more in control of their finances.

Accept rates increase. Borrowers will save £10 every minute. Excess interest charges will no longer end be paid to high cost lenders.

FHIs are a fairer credit assessment tool. Automated lending using FHIs, provides a holistic view of applicants’ capacity to repay. Never before have borrowers benefited from such tailored guidance, improving the quality of loan applications.

An integrated solution

Online applications feed into a decision engine. Subsequently this pulls Open Banking and credit bureau data together, in one place, to derive FHIs. Analytics link to marketing campaigns. The software integrates with web front ends. Back office systems can be linked via APIs.

Next steps

20 organisations, including 15 community lenders are joining an Advisory Group to participate in the development of new services around FHIs. FCA Project Innovate are helping with additional regulatory permissions. And we are feeding into the regulator’s Credit Information Market Study.

Contact us if you’d like to get involved.

About Adrian Davies

Adrian is a co-founder at NestEgg. He is an alternative finance expert with extensive experience of start-ups, business development, IT, Target Operating Models and regulatory compliance. Adrian has 18 years’ experience in the public, private and community and voluntary sectors, supporting businesses with innovative ideas so they can grow and meet service user needs.

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