Changing lending for the better - why it means change at speed
18th November 2020
We all knew change was coming in lending. But COVID has significantly accelerated the need for this change to happen.
At Oakbrook, we started our Open Banking journey a few years ago. We quickly realised that a new wave of data had positive implications for every step of the way: responsible lending, company culture, technology demands, decisioning transparency, customer journeys, financial wellbeing and more.
What none of us could foresee was a global pandemic which would explicitly shift the basic parameters of lending decisioning away from the industry’s historic reliance on bureau-based assessments and manual referral processes.
Take validating an applicant’s income as an example. This used to be done by asking the applicant to supply payslips or bank documents. Now, when we look back at this process, we realise there was so much inefficiency: applicants uploading the wrong documents or not uploading them at all; a large team of underwriters manually sifting through the documents; payslips that were 30 days out of date and fuzzy images which mean the underwriters can’t do their job.
In theory, Open Banking solves all this. But in practice, it’s much harder.
Validating a customer’s income using Open Banking data requires a huge amount of analytical and technical expertise. You need to be able to integrate Open Banking into the customer journey; to have the data infrastructure to capture all of the information and present it back to analysts; the analytical talent to build an algorithm that correctly identifies a customer’s income (not easy when some people have multiple jobs paying irregular amounts at irregular times); and the deployment architecture to implement these algorithms quickly.
Most of all, you need a culture that embraces rapid change, forward-thinking and the fact that the way we used to do things is long gone.
However, this is only the start. Access to Open Banking data allows us to personalise income and expenditure assessments with more accurate information, identifying potentially more vulnerable customers and building more powerful underwriting tools.
This is what a market moving at speed looks like. Customers will prioritise personalisation, fairness and low friction (but never at the expense of incorrectly determining their ability to repay). This can happen only if your technology and analytics can support advances in artificial intelligence and supervised machine learning and continue to deploy the insights gained from these tools super-quickly.
At Oakbrook Finance we are driven by change because changing lending for the better can only be about one thing: continuous improvement at speed that delivers superior customer outcomes.