Using Open Banking to deliver automated affordability checks helped not-for-profit lender Street UK to process 84% more applications without increasing headcount or risk appetite. Here's how they did it.
Street UK, a long-established, not-for-profit community lender has been growing steadily for the last 7 years. In 2020, over the pandemic, it made more than a thousand responsible loans to customers that are poorly served by the market and at risk of falling into high-cost, short-term credit arrangements. It plans to scale lending by 50% this year as part of its COVID recovery plan.
In 2021, Street UK engaged Bud in a bid to increase lending capacity by using Open Banking to automate the affordability assessment process. After an integration period, the new capacity went live in September 2021. Now, 6 months later, we’re able to take a look at the impact of Open Banking on Street UK and its capacity to deliver on its mission.
The Solution
- The Street UK team used Bud’s Assess solution to build a tool for advisors to use during loan application conversations.
- The tool allowed users to connect their bank accounts via Open Banking as an alternative to providing a manual summary/bank statement combination.
- Bud’s categorisation and merchant ID services provided the basis for detailed financial summaries that help Street UK operatives to understand if and how Street UK could make a loan.
The Impact
- By replacing the overhead associated with manually processing bank statements Street UK’s Open Banking capability has reduced the time taken to process an application by 43%.
- After a few rounds of UX improvements, 60% of borrowers chose to use Open Banking to complete their applications.
- This has resulted in an 84% increase in the number of applications processed by the organisation.
- In around 30% of cases, the platform’s categorisation engine was able to detect undisclosed “income-by-chance” (gambling, gaming, etc...) and/or buy-now-pay later commitments that would not have been apparent via a CRA check. This has improved the accuracy of Street UK’s decision modeling; allowing them to make more nuanced decisions based on real-time data.
The social impact
Perhaps most importantly of all, the new capabilities are allowing Street UK to increase its focus on serving deprived communities outside of its geographic heartlands in the West Midlands. The new digital channels are enabling Street UK to significantly expand its reach with 61% of all growth coming from the top 20% most deprived postcodes nationwide as ranked on the government’s indices of multiple deprivations.
Open Banking may have been designed as a competition remedy but it was clear to many in the industry that its application amongst deprived communities and thin-file credit applicants could be transformative.
We’ve been privileged to be a part of Street UK’s journey and we’re excited to continue supporting them as they scale their vital work.
For more on how Bud can help transform the affordability assessment process in your business, check out our Assess solution, affordability use-case page, grab the factsheet for our Assess solution below, or just get in touch. We'd love to talk.
Factsheet: Bud's Assess solution for affordability assessments
