Consumer credit has been in a sorry state for too long. The market is opaque, often unfair, and slanted too heavily in lenders’ favour. It’s time for action to make credit better for the consumer.
Technology can help us achieve this. The financial sector is slow to embrace change, but if we want to keep up with the demands of an increasingly discerning borrowing public, it’s vital that we get started.
At TotallyMoney.com, technology is at the very heart of our business, and we are employing new techniques to make credit fairer. First, we’ve tackled problems in eligibility checking. Traditionally, consumers had little or no idea which products they were likely to be accepted for, and at what rate. With as many as 70% of applications rejected, this made applying for credit frustrating. Even worse, a single rejection could negatively affect your credit rating and close doors to other lenders. This makes no sense: it’s comparable to going to the corner shop to buy a newspaper, only to be told by the shopkeeper that you can’t have it – and, while they’re at it, they’ve banned you from all the other corner shops, too.
At the same time, the industry’s obsession with being at the top of comparison tables has failed to deliver the right products for consumers. For example, the table-topping balance transfer card might have a long 0% period, but the fees could well be higher than products further down the rankings. Lenders know this, but it makes it very hard for consumers to compare. As a result, most don’t bother – remaining with their existing card for years.
Similarly, the definition of representative APR is not fit for purpose from the borrower’s perspective. When only 51% of successful applicants have to actually receive that rate, and the rest have to settle for deals that are often much worse, while this is an issue for the regulator rather than lenders it means that lenders’ marketing can be misleading. Worse still, by the time the real rate is given, borrowers often feel that they’re already committed.
To combat these intersecting problems, we’ve implemented a new technology, Match Factor, to ensure that TotallyMoney.com customers are offered products that are right for them and simplify what is currently far too complicated. We analyse an ever-growing set of data points beyond simple APR comparison to deliver tailored results for each customer. Our eligibility check technologies are also increasingly providing certainty around APRs for customers. Technologies such as AI and machine learning are helping us to make better suggestions every day. That’s not currently the norm in consumer credit, but I’m confident that this is going to change.
In the medium term, the uptake of Open Banking standards is going to usher in the next big change. API access to applicants’ data will help platforms like TotallyMoney.com deliver completely new services that will help people borrow more efficiently. We’ll be able to see the data that only the customer’s bank account provider can see today. This will make it much easier to assess the credit risk and offer better and fairer rates to many, especially those who are new to credit. Open Banking is a vital step towards a more customer-centric credit market, and it will encourage new entrants into the market, particularly from the fintech sphere. The established players are going to be challenged, and lenders will be forced to place their customers front and centre if they want to stay ahead.
Again, AI is going to play a big part in this shift. It will no longer be necessary to be a consumer finance geek, or to religiously read money saving guides, because borrowers will have full visibility of their own data and information about the products on offer to them, delivered by increasingly well-honed machine learning techniques. Consumers won’t have to ‘shop around’ – instead, they’ll log in to comparison platforms, and the technology will spit out the best deals for them.
Indeed, the word ‘platform’ is going to grow in importance as these new technologies develop. TotallyMoney.com is not a website – it’s a platform. Whether it’s on our own site or through those of our white label partners, consumers can benefit from the full range of new technologies we’re applying in order to make credit fairer.