Bringing lending into the 21st century
Tim Kelleway, director at D•One, talks to Marc Shoffman about the opportunities that open banking could present for credit providers…
ClearScore may be better known as a credit score provider that helps consumers find and access financial products such as loans and mortgages, but its work has extended beyond the consumer this year.
It is now helping credit providers bring their lending decisions into the 21st century by using open banking.
It launched a new business-to-business unit in January to offer UK lenders specialist open banking connectivity services to help them make sense of the data on offer.
The technology has been built following the group’s acquisition of Money Dashboard in early 2022.
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The hope is that its tools can help assess financial risk of borrowers and give providers the confidence to make more accurate and appropriate lending decisions based on real-time data rather than just credit files that can be historic.
Tim Kelleway, director at D•One, explains how the service has progressed so far this year and his solutions to getting more providers to use open banking.
Marc Shoffman (MS): What is ClearScore?
Tim Kelleway (TK): The basic premise of ClearScore is a consumer-friendly app that lets users access their credit score and report for free. We have 14 million users in the UK and 20 million worldwide.
It’s an app that allows users to connect to their credit score and report to get access to better products. We have a marketplace that lets users find loans and credit cards that may be appropriate for their circumstances.
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We enable our users to connect their bank data through open banking. This lets them see insights of what their financial footprint looks like, and helps them piece together how they can match their credit score and affordability situations.
MS: What is the relationship between D•One and ClearScore?
TK: D•One is a B2B business which is a wholly-owned subsidiary of the ClearScore group. The reason we launched last year was with the intent of accelerating the adoption of open banking for both lenders and consumers, so that lenders could make more surgical decisions rather than taking a broad brush position.
Open banking data contains all of a user’s incoming and outgoing transactions. It helps lenders understand if there is any risk regarding repayments, how much consumers are spending and how much income they are getting. It helps to make a much more individualistic decision.
There are two products on offer to clients. Connection•One powers an open banking sign-up and authorisation process and Category•One helps lenders classify and analyse bank transactions as part of the underwriting process. The main consumers are those accessing it via the ClearScore marketplace.
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We are also delivering services to lenders directly on their own domains. It is open to anybody offering credit, including providers in the P2P lending space, helping them access the bank connection suite we have.
We are on the cusp of seeing lending organisations managing risk data and looking at this as an open data source. The concept has been floating around for a few years but has struggled to get traction. However, a lot of different lenders are now coming to us to understand the data.
MS: Has there been enough take-up of open banking?
TK: It has been slow. That is a common opinion. It is a two-fold problem. A user is being asked to give their data up but without a real concrete promise of what they will receive.
The lenders themselves are trying to make sense of a dataset they haven’t seen before. For a lender to understand the risk-splitting power of the data, they have to see enough of it so they can offer better pricing and access. That is why on ClearScore we have tried to take the bull by the horns and give user feedback on the data so they can share it.
MS: Are there any other challenges?
TK: The main challenge that lenders have is to ingest a large amount of data and make sense of it quickly enough to be able to return a decision.
If someone is in the process of an application then they are happy to wait but if they are searching the market, they want to see options quickly. With D•One we have made sure our technology is top drawer.
The other challenge is to integrate our technology into all parts of the ecosystem from lenders to introducers.
MS: When could open banking become more widely adopted?
TK: In general, the point is to enable users to get a better deal in line with the new consumer duty regulation that states lenders should be avoiding foreseeable harm and enable users to reach their financial goals. Open banking is an easy way to do that.
If consumers are making their data available, we feel the lenders have a duty to at least look and understand it, that is what we are making available.
My prediction is that, based on the appetite for our services, a lot of providers are considering how they leverage open banking for good. I think we will see a tipping point over the next 12 months.
