The future of affordability – what you need to know

Consumer lending has changed dramatically in the last two decades. Regulation has evolved to accommodate these changes, resulting in notable developments around assessing affordability and treating customers fairly. But as the social, political and economic landscape of the country shifts, affordability needs to shift with it. For lenders that want to stand out amidst the competition, understanding the biggest issues likely to face affordability in the future is absolutely key.

Here are some of the key trends to anticipate and what can be done about them:

• Brexit will have an impact, but no one quite knows what it will be
  It is hard to think about the future of any industry at the moment without considering the Brexit effect. In the immediate future, given that lending regulation is largely a national responsibility, it is unlikely that we will see any significant immediate change. However, Brexit’s potential impact on consumer behaviour could have wide reaching implications. As businesses begin to realign their priorities and deal with the wider repercussions of the decision, certain areas, including affordability assessments, will be impacted.
• Future business priorities can be supported with affordability assessment
  Over the next few years, lenders will want to increase market share, retain customers, innovate, and grow profitability from existing customers. All of these business objectives can be supported with affordability assessments.
• Organisations need to ensure that, as regulation, customer expectations and business priorities continue to change, they plan ahead and use affordability solutions that can meet shifting industry and customer needs.

Four areas for improvement you should consider making to get the most out of assessing affordability:

1. Identify your weaknesses
   The roadmap will be different for every lender so the first step is to identify your individual weaknesses – for example the time taken to conduct an assessment, or a lack of insight into your customers beyond initial assessment – and establish how you plan to address them.
2. Simplify the process
   For businesses looking to improve their customer experience, there is a range of solutions that can help verify income and expenditure without asking consumers to provide supporting documents. These automated processes offer a digitalised view of transactional data that can help businesses make informed decisions quickly and easily.
3. Don’t just implement affordability checks at point of application
   Organisations need to adopt a continuous approach to assessing affordability and creditworthiness. This sort of strategy delivers improved business opportunities whilst ensuring a fair, frictionless consumer experience.
4. Gain comprehensive insight
   Working with Callcredit will give you access to some of the most comprehensive affordability insight in the UK, providing you with a fuller view of a customer. This gives you the confidence that you are making more informed lending decisions, whilst ultimately ingraining fair customer treatment at the centre of the business.

The need for robust affordability assessments is here to stay. In order to truly thrive, the future needs to be built on a few key foundations – accurate data, technology that can evolve and compliance. These three things will help you to meet the necessary regulatory requirements, limit the impact on your customers, put your customers at the heart of every decision you make, and reduce over-indebtedness.