Equifax UK, a leading credit reference agency, has introduced Affordability 360, a pioneering solution for lenders that merges credit bureau insights with real-time transaction data from Open Banking.
This innovation aims to strengthen affordability assessments, leading to better-informed lending decisions and enhanced customer outcomes, according to Finextra.
Equifax UK developed Affordability 360 in response to mounting pressures within the lending sector to accurately gauge customer affordability.
According to recent research from the firm, nearly a quarter of lenders (24%) rely on self-reported customer data to assess expenditure, while other sources include credit bureau data and statistics from the Office for National Statistics (ONS).
Inaccuracies in these methods underscore the need for a comprehensive, data-driven solution.
The Affordability 360 tool provides lenders with a holistic view of customer finances by combining Equifax’s credit bureau insights with granular Open Banking transaction data, ONS estimates, and Minimum Income Standards.
This integrated approach leverages algorithmic insights to automatically source the most relevant data for each customer, helping lenders meet the rigorous demands of Consumer Duty standards and creating a more accurate and efficient assessment of affordability.
The advanced algorithms behind Affordability 360 allow lenders to reduce reliance on singular data sources and obtain a transparent view of an individual’s financial health. Equifax projects that the new solution may boost approvals for low-affordability applicants by 29% while reducing the risk of default, outperforming models reliant solely on declared income and ONS data.
This product launch comes as the financial sector faces the first anniversary of Consumer Duty standards, with affordability assessments emerging as a key compliance focus for over 20% of financial services firms.
In light of ongoing cost-of-living pressures, Equifax’s Affordability 360 aims to support lenders in advancing financial inclusion and protecting consumers from unsustainable debt.
Equifax UK’s Chief Strategy and Innovation Officer, Craig Tebbutt, said, “The rising cost of living as well as 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. Each of these models has different strengths but a combination is likely to provide the most transparent view of financial health. 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.”
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