Credit reference agency Equifax UK has launched an affordability solution for lenders that combines credit bureau data with real-time transaction data accessed via Open Banking, and statistical estimates.
The launch of ‘Affordability 360’ comes after research by Equifax found that 24% of organisations rely on a customer’s self-declaration to assess expenditure, while 19% are reliant on credit bureau insights and 16% on data from the Office for National Statistics (ONS).
‘Affordability 360’ intends to provide “a more complete picture” of a customer’s income and expenditure by blending Equifax bureau insights, Open Banking transaction data and statistical estimates from ONS and Minimum Income Standards.
Equifax has estimated that using the data in combination is likely to be more predictive of customers defaulting than using declared income and ONS calculations alone.
According to Equifax UK, it could result in a 29% uplift in lender approvals for low affordability customers, based on analysis of a sample of approximately 30,000 applicants who had completed an Open Banking journey.
Craig Tebbutt, chief strategy and innovation officer at Equifax UK, said the combination of the rising cost of living and the new Consumer Duty standards are making “more robust and accurate” affordability assessments “a top priority” for lenders.
“Currently, lenders choose to rely on a range of different data sources to help understand consumer income and expenditure levels, which can include current account turnover data, self-declarations or government statistics,” he said.
“Each of these models has different strengths, but a combination is likely to provide the most transparent view of financial health.”
Tebbutt added: “Affordability 360 brings together the power of granular Open Banking data with both bureau insights and statistical data to provide lenders with a deeper view of customer affordability, helping to boost financial inclusion and responsible lending decisions.”
Earlier this month, Equifax UK launched an Open Banking solution, ‘Tariff Connect’, which helps certain utility and telecom providers automate customer eligibility assessments for social tariff discounts. The new solution was recognised at the Open Banking Expo Awards 2024 in the Best Sector Initiative category.
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