Covid, Credit Decisioning & Open Banking

The impact that Covid-19 has had on all aspects of everyday life has been particularly evident when it comes to finances. During the UK’s first lockdown, the area of consumer lending changed rapidly, as it will undoubtedly continue to do in the coming months, and maybe even years. 

The lockdown initiated an immediate response from consumers with a large reduction in overall demand for credit. Between March and June 2020, net household borrowing (excluding student loans) decreased by £15B, with negative year-on-year growth. 

This decreased consumer need for credit is likely down to the following factors:

  • Increased household income due to:
    • Working from home & cutting the cost of commuting and eating out 
    • Limited opportunities for entertainment and social spending  
  • Deferral or cancellation of larger ticket spending such as holidays 
  • A desire to reduce debt in apprehension of potential redundancy 
  • Increased economic uncertainty 

This unprecedented consumer behaviour has rendered the available information provided to lenders by credit bureaus somewhat volatile due to fluctuating factors limiting its relevance. This is where Open Banking can ultimately step in to provide an up-to-date picture using real-time data, and helping to kickstart an area of the economy otherwise brought to a halt. 

Particularly pivotal for young people, with 16-24 year olds facing the highest levels of unemployment since 2016, credit decisioning for those with ‘thin’ files can be much more effectively and efficiently made, with an insight into their spending patterns and other essential variables.  

By embracing the technology of products like AperiData’s Credit Console and intelligent decision block, lenders can enjoy real-time revelations and user-friendly dashboards with insights into spending patterns, overdrafts and other accounts held elsewhere. Not only this, but customers will also benefit from a more tailored experience, with more vulnerable consumers able to provide a point of contact or disclose further information about their financial status. 

With Open Banking users surpassing two million in September 2020, this financial ecosystem promises to flourish even further. Find out more about Open Banking.

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