How lenders navigate Covid-19 must start with the consumer
Founder and CEO, Aneesh Varma, recently highlighted the personal impact of Covid-19 for CityAM. Here are our highlights.
The credit landscape in London
‘Our capital city is expensive. Many of us rely on credit to make ends meet here.’
Pre-pandemic, credit demand was higher in London than anywhere else in the UK, yet acceptance rates were lower, at just 51 per cent versus 69 per cent elsewhere.
If unemployment reaches 10 to 15 per cent as anticipated, many more Londoners will fall into financial difficulty. Underemployment (working inadequate or reduced hours), particularly given our high number of gig workers, will reduce disposable income and affordability for many more.
The unfortunate three stage impact on lenders
‘Lenders have a moral responsibility towards their customers — it is not good enough for them to turn their back and brace for default.’
- The effect of Covid-19 on borrowers is highly unpredictable. It depends very much on the sector they work in, their personal circumstances and their luck.
- The usual tools in place for lenders to assess their customers are no longer helpful. When financial situations are changing daily, traditional data sources are not useful indicators of creditworthiness or affordability, taking months to report change or to record defaults. They are just not dynamic enough.
- The regulator will quite rightly hold lenders to account over their treatment of consumers during this time. The regulator is right to push for better here.
How better data can help
‘Lenders must undertake to access the most real-time view of their customers possible: the full story, the holistic picture, the truth.’
Work, skills and education, to housing and relationship status, as well as dependents and depth of savings are all now vital insights that are needed to navigate today’s reality.
They can do this, compliantly and at scale with first-party data.
Coming not from traditional credit reference agencies, or from social media, first-party data is both unique and powerful in offering lenders the most relevant view of their customer imaginable — and with full consent from the consumer.
Done right, it stands to upgrade the credit ecosystem by shifting the balance in favour of the consumer. A more equitable co-design if you will, for the long-term.
A warning to lenders
‘Recovery will come. But it is how consumers are treated now that they will remember.’
Lenders that choose to prevent, anticipate and understand their customers will be held in higher regard in years to come by both the people they serve and the regulator they answer to.
The full article was originally published by CityAM in September 2020.
First-party data is finally shifting the power balance in credit decisioning towards the consumer — find out how you stand to benefit here.
