The limitations of credit checking
Credit checking helps. Yet when faced with a loan application there’s nothing like seeing a bank statement. However, reviewing paper statements is error prone and causes delays. And for the loan applicant, it’s intrusive and off-putting. As a result, far too many applicants abandon an online application once they’re asked to find, copy or print and post a paper bank statement.
Paying to get people to your website, only for them to leave once they see its complicated to apply for a loan. That’s a waste of hard-earned income.
We recently blogged that relying only on credit reference agency data is problematic. Especially when assessing loans from the financially excluded.
Thin files. Loans from obscure lenders. The simple reality of living on a low income. Its hard to get a true view of some applicants. The benefits of using bank statements to assess a loan are reinforced.
Our partnership with TrueLayer
Teaming up with TrueLayer enables our decision engine to automate bank statement assessment.
Building policy rules around transaction data allows for accept, refer or decline recommendations.
Data hits the decision engine for analysis. Decisions are made about affordability, indebtedness and fraud. Loan Officers are provided with categorised lists of income and expenditure.
Do members have money left over each month? Is an applicant paying everything on time? Likewise are there bounced direct debits? Consequently do debt collectors show up? Maybe the member consistently uses an overdraft to pay for living expenses?
Importantly this new approach supports compliance. The Financial Conduct Authority (FCA) has raised concerns about affordability. Regulators see a cocktail of irregular incomes, high cost credit and overdrafts and credit cards being used to meet expenditure needs. Lenders need to take extra steps to ensure a loan is in the consumer’s best interests.
Moreover, this month the FCA stated its commitment to protecting vulnerable customers. Critically, such individuals are owed a duty of care.
“Consumers need to know that they are being treated fairly and that the right protections are in place. Different groups of consumers have different financial needs, which will naturally change over their lifetime.” – Andrew Bailey at the FCA
Transaction data provides an up to date picture of an applicant’s financial well-being. Because lending decisions use actual expenditure rather than statistical models, better affordability assessments are made.
Building the right customer journey
Credit unions will find integrating our decision engine straight-forward. The member grants access to their bank account when an application is returned for manual assessment. Borrowers do not have to leave the application form. Above all, this could be completed on a mobile device.
Our partnership with TrueLayer means the decision engine will deliver all of this.