Credit reference agency Equifax UK has launched a first-of-its-kind solution for lenders, combining bureau insights with real-time transaction data accessed via Open Banking and statistical estimates to boost affordability assessments and consumer outcomes.

Traditionally lenders have relied on a mixture of consumer affordability assessment models. Industry research from Equifax found nearly a quarter (24%) of organisations relied on a consumer’s self-declaration to assess expenditure, while 19% rely primarily on credit bureau insights and 16% rely on Office for National Statistics (ONS) data1. For improved accuracy, it’s important to rely on a number of data sources.

In a first-of-its-kind solution, Affordability 360 therefore combines Equifax bureau insights, granular Open Banking transaction data and statistical estimates from ONS and Minimum Income Standards in one streamline package for a more complete picture of consumer income and expenditure.

Affordability 360 is built on robust algorithms to ensure clients are automatically able to choose the best possible source of data on an individual basis, helping to meet Consumer Duty standards while also providing an efficient and accurate assessment of affordability. Equifax estimates that using the data combination is likely to be more predictive of consumer’s defaulting than using declared income and ONS calculations alone, while the solution could result in a 29% uplift in lender approvals for low affordability consumers 2.

The launch follows the first anniversary of the new Consumer Duty standards, for which over a fifth of financial services businesses have identified affordability assessments as their number one compliance challenge 1. As cost-of-living pressures continue, lenders need to simultaneously ensure they are supporting financial inclusion and helping to protect consumers from taking on unaffordable credit streams to ensure good consumer outcomes.

Craig Tebbutt, Chief Strategy and Innovation Officer at Equifax UK, said: “The rising cost of living as well as the new Consumer Duty standards are making more robust and accurate affordability assessments a top priority for lenders. Currently, lenders choose to rely on a range of different data sources to help understand consumer income and expenditure levels, which can include current account turnover data, self-declarations or government statistics. Each of these models has different strengths but a combination is likely to provide the most transparent view of financial health. Affordability 360 brings together the power of granular Open Banking data with both bureau insights and statistical data to provide lenders with a deeper view of consumer affordability, helping to boost financial inclusion and responsible lending decisions.”

-ENDS-

1-Research carried out for Equifax by Open Banking Expo was conducted between 14 July and 5 September 2022. Total sample represents 127 senior decision makers from UK financial services companies.
2-Analysis based on a sample of ~ 30,000 applicants who had completed an Open Banking journey. Consumers were categorised as having ‘low affordability’ based CATO Affordability Index - Non Tier 1 Banding 4. Consumers’ performance was marked as 'Good' or 'Bad' based on whether they had defaulted on any financial agreements during the 12 months we observed.

About Equifax
At Equifax (NYSE: EFX), we believe knowledge drives progress. As a global data, analytics, and technology company, we play an essential role in the global economy by helping financial institutions, companies, employers, and government agencies make critical decisions with
greater confidence. Our unique blend of differentiated data, analytics, and cloud technology drives insights to power decisions to move people forward. Headquartered in Atlanta and supported by nearly 15,000 employees worldwide, Equifax operates or has investments in 24
countries in North America, Central and South America, Europe, and the Asia Pacific region.

Equifax Ltd is one of the Equifax group companies based in the UK. Equifax Ltd is authorised and regulated by the Financial Conduct Authority. For more information, visit equifax.co.uk and follow the company’s news on LinkedIn.