A NEW Open Banking-powered solution to assess creditworthiness has been launched, enabling consumer lenders to access better information on potential borrowers.
Credit bureau fintechs ClearScore and Credit Kudos have partnered on the new eligibility solution for products including mortgages and loans.
It uses the data-sharing initiative Open Banking, which mandates high street banks to share anonymized customer data with approved third parties, to give lenders access to more up-to-date information than was previously available to them such as real-time income and expenditure and also an indication of future liquidity.
The partnership is also said to give more precise risk and affordability measurements to lenders, thereby improving time savings and accuracy while also reducing operational costs.
Meanwhile, borrowers will increase their chances of securing new credit by sharing this financial information with lenders.
The launch will open up the market for underserved borrowers, the fintechs said.
“At ClearScore, our aim is to help everyone, no matter what their circumstances, achieve greater financial well-being,” said Andy Sleigh, chief operating officer of ClearScore.
“However, it remains that a large proportion of the UK population are underserved by financial institutions and still held hostage by their circumstances. By partnering with Credit Kudos, we are aiming to change this.
“By providing lenders with more information via our Open Banking integration to improve their decisioning process and affordability assessments, we will open up the credit market to thousands of underserved users who have previously been rejected. Plus, our research has shown that using open banking to open up lending to just five per cent of ClearScore’s underserved population would result in an additional £30m in lending per month. This could grow significantly in the following months and years as these users begin to use further forms of credit.”
Freddy Kelly, chief executive and co-founder of Credit Kudos, said the new solution would revolutionise how lenders are assessing prospective borrowers.
“Harnessing the power of Open Banking data will provide lenders with the means to better understand individual borrowers through valuable insights and personal data that are not currently available in the traditional credit score assessment,” he added. “In turn, lenders will be able to re-evaluate their portfolios to create more personalised product offerings. We believe that the use of Open Banking data is the start of an important and positive change in the lending sector.”