Affordable credit challenge reveals winners making fair credit more accesible
  • The Affordable Credit Challenge, run by Nesta Challenges in partnership with HM Treasury, encourages fintech innovators to partner with community lenders and widen access to responsible, affordable credit.
  • Winning solutions revealed in the Budget are an open banking-enabled credit check to make it easier for people with limited credit history to access affordable loans, technology that makes it easier for people to join and engage with a credit union, and a credit facility specifically for a frozen food shop in school holidays when family grocery bills spike.
  • Over 8 million people in the UK use credit to pay for everyday household expenses, and many of them struggle to access fair, affordable credit. 82% think more needs to be done to ensure there are alternatives to high-cost lenders.

Three partnerships between community lenders and fintechs have secured a cash prize of £200,000 each for developing innovative solutions that make credit more accessible and affordable, particularly for the most vulnerable. The cash prize is part of a £2m Affordable Credit Challenge, run by Nesta Challenges in partnership with HM Treasury.

The Challenge enables community lenders to join forces with tech-savvy fintechs, who will work in partnership to provide people with alternative fair solutions to high cost lenders.

The three winning partnerships have highly credible and effective solutions which all have the potential to impact many financially vulnerable people across the UK who use credit to pay for everyday household expenses, and often struggle to access fair, affordable credit.

The winning partnerships are:

  • Capital Credit Union with Nivo and Soar  A mobile app using the latest digital financial technology to make it easier for people to join and engage with a credit union, giving new audiences – particularly financially excluded and younger people – the opportunity to save and gain access to affordable credit.
  • Fair for You with EML and Lending Metrics – A revolving loan facility to provide buffer credit specifically for an additional frozen food shop in school holidays, when low income households often using high cost short term credit to cover spikes in grocery costs when children do not have school dinners provided. A pilot is being trialled with a leading supermarket.
  • Police Credit Union with Credit Kudos – A reward loan solution that uses open banking to monitor a borrower’s behaviour and reduce the interest rate they pay over time as they develop healthy financial habits – helping those in the police, armed forces and other protective services with a poor credit rating to access affordable credit.
  • The winners were chosen from six finalists who, as well as being given an initial grant of £150,000, have also been supported by Nesta Challenges and HM Treasury to develop their solutions by providing non-financial assistance such as network events and legal support.

The Economic Secretary to the Treasury, John Glen, said: “The UK’s world-leading fintech sector has a huge role to play in helping the most vulnerable access alternatives to high cost credit. That’s why we set up the Affordable Credit Challenge, bringing together fintechs and community lenders to develop new, pioneering solutions to this challenge.

“The three winners, announced at Budget, have done amazing work and I look forward to seeing how they help more people to access affordable credit products”

Research conducted to mark the launch of the Challenge revealed eight in ten (82%) people think more needs to be done to ensure there are alternatives to high-cost lenders and 75% believe not-for-profit, community lenders need more support to succeed.

Chris Gorst, Head of Better Markets at Nesta Challenges, said: “The three winning partnerships are great examples of how technology can remove some of the barriers that currently prevent community lenders widening access to affordable and fair credit. Social lenders haven’t historically been able to compete with high-cost alternatives on speed or reach and uniting with fintechs addresses this issue. As these partnerships are becoming a reality, I believe we will see the beginning of a transformation in the personal lending market to support those who need it most.”

Joanna Elson OBE, CEO of Money Advice Trust, and chair of the Affordable Credit Challenge judging panel, said: “There is a huge need for affordable credit, and we know that technology can help credit unions and others to both reach people who need it and provide the kind of service that mainstream financial institutions offer. The panel was really impressed by all the finalists – and we’re looking forward to seeing the results of these exciting partnerships.

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