Credit reference agency Equifax UK has launched a new solution for lenders, combining bureau insights with real-time transaction data accessed via open banking and statistical estimates to boost affordability assessments and customer outcomes.
Almost a quarter (24 per cent) of lenders rely on a customer’s self-declaration to assess expenditure for affordability assessments, while 19 per cent primarily rely on credit bureau insights and 16 per cent rely on Office for National Statistics (ONS) data, according to Equifax research by Open Banking Expo.
Equifax’s new solution, Affordability 360, combines Equifax bureau insights, granular open banking transaction data and statistical estimates from ONS and Minimum Income Standards in one package. The offering aims to provide a far more ‘complete picture’ of customer income and expenditure.
Affordability 360 is built on robust algorithms to ensure clients can automatically choose the best possible source of data on an individual basis, helping to meet Consumer Duty standards while also providing an efficient and accurate assessment of affordability.
The launch follows the first anniversary of the new Consumer Duty standards, for which over a fifth of financial services businesses have identified affordability assessments as their number one compliance challenge.
Craig Tebbutt, chief strategy and innovation officer at Equifax UK, 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.”
Equifax estimates that using the data combination is likely to be more predictive of customers defaulting than using declared income and ONS calculations alone, while the solution could result in a 29 per cent uplift in lender approvals for low-affordability customers.
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