The financial services sector is being disrupted by brands who are capitalising on consumer appetite for different ways to do business, opportunities presented by regulatory change and continuous innovation in data and technology.
The Consumer Duty regulations — overseen by the Financial Conduct Authority (FCA) and implemented in July 2023 — require financial services firms to prioritise customer needs and empower informed financial decisions whilst addressing the need for improved financial inclusion and more positive outcomes for UK consumers.
In this article, we highlight three brands disrupting the financial services sector and harnessing the opportunities presented by this new regulatory framework. Each business is seeking to improve the financial confidence of consumers and address the issue of financial inclusion whilst building a customer base that’s engaged and sustainable. We’ll explore the strategies they’re employing and what the industry can learn from these different approaches.
NewDay has been helping people move forward with their credit for over 20 years. Offering both direct-to-consumer propositions and point-of-sale finance solutions for both well-known and niche retailers, the brand views customers as long-term partners and is hyper focused on meaningful engagements.
Aqua, one of NewDay’s successful D2C brands, was created to serve an estimated 14 million UK consumers who it classes as near prime. Aqua provides access to credit and helps customers build credit files over time with the ambition this will help them gain access to a greater range of financial products in the future.
NewDay currently has over 500K customers using Aqua Coach (launched in 2013), which is part of its Aqua proposition. By staying close and listening to its needs, NewDay has been able to work toward these goals simultaneously. The platform’s evolution has centred around helping consumers understand the direction of their credit scores, and offering them quantifiable actions and precise information on how to help improve them. This involved developing a suite of rich, interactive tools that helps consumers improve their financial confidence — facilitated through the integration of TransUnion CreditView solution within the platform — and a strategy committed to providing customers with:
At the TransUnion FUTURE Summit 2023, Alex Cook, Head of Product at NewDay, reported half of Aqua Coach sign-ups check their scores once a month and 12% click more deeply into their information. This level of engagement resulted in 62% of users of Aqua Coach improving their scores within the first 12 months of using the service, with 16% improving their scores to ‘Good’ or ‘Excellent.’ Building on this opportunity is key, with Cook stating it offers opportunities to optimise marketing campaigns and strategically to look at “…how the actions of the customer are affecting the terms of credit that we are offering.”
Zilch is a pioneering direct to consumer credit provider and advertising technology company with a vision to eliminate the cost of consumer credit. Zilch provides 3.5million customers with the freedom to go anywhere in the world (online or offline) and earn up to 5% cashback & rewards on debit payments (‘Pay Now’) or spread interest-free credit repayments over six weeks (‘Pay in 4 over 6 weeks’) and in the process help build their credit profiles with TransUnion and the other major credit reference agencies.
Since April 2020, Zilch has been regulated by the Financial Conduct Authority (FCA), obtaining a consumer credit licence through the Regulatory Sandbox Programme.
Zilch is built around an ad-subsidised payments network (ASPN) that brings value to customers, merchants and marketers alike with a closed loop network of high intent customers. Customers use a Zilch Virtual Mastercard that offers flexible terms, zero percent interest and no late fees. This unique approach is built around routing customer purchases through affiliate ecosystems with the ‘bounty’ fees used to subsidise the credit and rewards for customers.
The organisation is focused on democratising the lending space, and part of its levelling up plan is to improve the financial health of its customers. To better understand how this can be achieved, Zilch asked its customers what are the most important aspects of financial health to them. Top of mind was:
Zilch believes the key to unlocking the benefits above for consumers starts with helping them understand their credit score and offering guidance on ways to help improve their financial health. Retro data research carried out by Zilch and TransUnion indicates that this personalised approach would help a significant percentage of customers improve their score. This has kicked off product development that will see Zilch launching its version of credit monitoring and education insights, powered by TransUnion, for its customers.
Zilch also wants to improve the financial health of other customer profiles. In 2023 it announced the launch of Zilch Up; a product dedicated to empowering people typically excluded from mainstream credit. This has already helped more than 25,000 people switch from being invisible to visible in the eyes of major credit referencing agencies. Speaking at the 2023 TransUnion FUTURE Summit Desmond McNamara, Chief Risk Officer (CRO), Zilch also explained the business’ deep focus on the quality of their customer data and desire to serve customers better by proactively looking to reduce the number of credit invisibles in the UK.
incuto, a FinTech for social good, is on a mission to offer UK consumers improved access to credit and broader range of affordable credit products. Its approach has involved embracing emerging technology and a dynamic view of how to create new and differentiated value for consumers. The company embarked on a joint initiative with aggregator Monevo and TransUnion to help credit unions and community development finance institutions offer products to a wider audience via comparison websites — increasing competitiveness in the credit space and promoting financial inclusion. This collaboration brings together the unique capabilities of each partner: TransUnion provides robust credit data; incuto enables community lenders to reach more potential customers; while Monevo helps them host, manage and distribute their credit offers.
Andrew Rabbitt, CEO of incuto, stated: "We’re committed to providing community lenders with all the necessary tools and technology to thrive in a competitive financial landscape, connecting more people with affordable finance products. We think it's crucial that credit unions are presented on credit comparison websites, allowing consumers to have better choices when looking for a suitable credit product."
This approach aligns with consumer preferences: The majority (58%) of UK consumers who check their eligibility for finance before applying for credit products rely on price comparison platforms as their main go-to source for credit. For incuto customers, Monevo technology allows product updates to be implemented within seconds, meaning the offers shown to consumers are real interest rates for which they’re eligible.
incuto’s innovative approach to serving consumers a broader range of products and commitment to financial inclusion is underscored by its use of Open Banking, and being one of the first providers to harness the Bud and TransUnion partnership developing the next generation of Open Banking solutions.
TransUnion’s role in shaping the current financial services ecosystem includes our award-winning credit education solution CreditView, Open Banking platform and trended credit data product. This suite of solutions can help businesses deliver affordability processes that are CX-friendly and encourage positive outcomes, deeper customer engagement and customer retention.
Talk to us to find out how TransUnion's insights and data solutions can help support your business and help deliver positive outcomes for you and your customers.