- 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.
- Finalist solutions revealed today include open banking enabled tools such as alternative credit scoring to make it easier for people to access affordable loans and a credit
facility specifically for a frozen food shop in school holidays when family grocery bills spike
- Challenge demonstrates the potential for technology to help community lenders provide an alternative to high cost lenders by improving the digital user experience and helping community lenders better use customer data to make decisions
SUNDAY 3 NOVEMBER 2019 – Six partnerships between fintechs and community
lenders have today secured £150,000 each in funding to develop innovative solutions that make credit more accessible and affordable. Solutions include alternative credit scoring to make it easier for people to access affordable loans, using open banking to
monitor borrowers’ behaviour and reduce interest rates over time, and a credit facility specifically for a frozen food shop in school holidays when low income households often turn to high cost credit to cover grocery bills.
Run by Nesta Challenges in partnership with HM Treasury, the Affordable Credit Challenge is a £1.5m prize that encourages UK fintechs and community lenders – such as credit unions – to work together to ensure people are able to access alternatives to high-cost short-term credit. Unfortunately, many people turn to high cost lenders, such as payday loan companies, which can cause further financial hardships.
The Challenge encourages fintechs and community lenders to partner and develop solutions that help community lenders better serve their customers.
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.
Out of the 41 entries received from partnerships of fintechs and lenders, the judging panel – made up of experts from the fintech and community lending industries – selected the six most promising concepts to move on to the final round. Each team has been awarded up to £150,000 to develop their innovation over the next five months. The finalists are:
- Capital Credit Union, 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.
Central Liverpool Credit Union (CLCU) and NestEgg
– Using open banking to look at someone’s spending, borrowing and saving to provide an alternative credit scoring system and therefore helping those previously considered too risky to be offered credit.
Credit Unions for Greater Manchester and Incuto –
A single application portal for a consortium of credit unions offering a range of products, using credit bureau and open banking data to make it easier for people to apply, and get
immediate decisions – enabling them to offer the same speed as payday lenders.
Fair for You and EML & 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.
Police Credit Union Ltd and 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.
Salad Money and Credit Kudos – An innovative way to offer affordable loans that are
repaid using pay slip deductions. This is achieved by using open banking and artificial intelligence to improve credit decisioning and offer access to low cost credit for public sector workers – such as NHS staff – who use high cost credit more than average
Over the next five months, the finalists will work with Nesta Challenges and HM Treasury to develop their solutions, also receiving non-financial support. Three of the finalists will go on to be named winners in spring 2020, receiving a further £200,000 each to invest in their idea.
- Chris Gorst, Head of Better Markets at Nesta Challenges, said: “Technology
is already transforming how we manage our money every day, but our trusted community institutions – like the local credit union – have fallen behind in the use of technology. This means they often struggle to reach customers or compete with the speed and convenience offered by high-cost
“We’ve been delighted to see so many fintechs and social lenders uniting to develop innovative ideas to transform the personal lending market for the better. We’re looking forward to working with the finalists to make their concepts a reality and, ultimately, making it easier for people to access affordable, responsible credit when they need it.”
Joanna Elson OBE, CEO of Money Advice Trust, and chair of the Affordable Credit Challenge judging panel, said:
“I was delighted to chair the panel making awards to partnerships that are trying new ways of widening access to responsible, affordable credit. Across the UK there is a very real need for affordable credit for people who struggle to smooth the peaks and troughs
of their financial lives, and it is great to see community lenders working with fintechs to apply new technology to this challenge.Whether the partnerships aims to provide a credit buffer for an extra food shop during the school holidays, or to offer affordable
- credit to those it has been deemed too risky to lend to before, it is going to be exciting to see how these partnerships develop – and I look forward to seeing their progress in the coming months.”