What does the digital age mean for affordability practices?

Affordability assessments are a well-ingrained part of lending practices. Despite these assessments having been carried out routinely for the best part of the last ten years, there has been little innovation in this space, and the customer journey remains much the same. The experience is often dictated by disjointed and bureaucratic processes, which are resource-intensive for organisations and often deliver poor outcomes for customers.

A customer perspective

When consumers are looking for a loan, they will want to consider a multitude of lenders. Usually, this will involve contacting multiple credit providers to find the best rate or payment arrangement. However, this could mean the customer will have to provide the same income and expenditure information several times to various different firms. It’s a potentially time-consuming process that does not favour the borrower.

To further compound the issue, it can often be difficult for customers to accurately recall all the necessary affordability information without preparation. This is a particular challenge when the creditor contacts the borrower, and creates a risk that the conversation is not a true reflection of the customer’s personal circumstances.

A creditor's perspective

Investing in technology that enables creditors to capture key affordability information accurately, as well as operate efficiently, will be invaluable in streamlining the process and lowering costs. There are four elements that can be significantly improved with existing technology to make the entire affordability process more successful, for both the customer and creditor:

  1. Income validation
    Lenders have noticed that customers often understate or overstate their income to avoid a less than ideal repayment arrangement. Digital solutions such as MOGObankconnect can capture current account turnover and application salary information on the majority of individuals in the UK in a matter of seconds. This makes the validation process faster (and more accurate), meaning businesses can be confident that repayment plans are both affordable and sustainable for customers.
  2. Credit verification
    Customers are likely to have multiple lines of credit and it’s fairly common for people not to mention certain debts. Luckily, current tech now allows affordability departments to see all outstanding types of credit and time series stamped data up to 12 months. This gives a true understanding of an individual’s level of overall debt and ensures organisations make responsible, informed lending decisions.
  3. Household expenditure
    The problem with using measures like the Money Advice Trust’s ‘Common Financial Statement’ (CFS) to determine household expenditure is that they don’t really account for spending differences based on location. Measures like the single use sealed smart browser let customers securely share their relevant information, providing them with a first-class customer experience that also removes operational costs for the creditor.
  4. Self-serve
    Sometimes, customers aren’t in a position to quickly and conveniently provide the information required by lenders. Offering customers the ability to self-serve an affordability assessment through an online portal can easily mitigate this issue.

Bringing affordability practices into the digital age

By embracing new technology, creditors can streamline affordability measures and quickly build a complete view of customers’ financial stability, without having to ask them for reams of paperwork. Creditors can have full confidence in their decision making, and the customer experience will be frictionless enough to bolster retention. It’s a win-win.

Watch the video to find more about how you can evolve your assessment process, and join us on our journey towards The New Affordability.

To find out more about how you can evolve your assessment process, and join us on our journey towards The New Affordability. Download the report today.

Download the The New Affordability Report

Want to speak to us about our Affordability Suite? Give us a call on 0113 220 1616.

Author: Eamonn Tierney, Managing Director – UK Business Development

If you’re a consumer with questions or issues related to your personal credit report, drivers history report, disputes, fraud, identity theft, credit report freeze or credit monitoring services, please visit our Customer Enquiries page for assistance.

Contact Us

TransUnion would like to send you original insight, commentary and research on data, software and analytics, early notifications of exclusive events and information about our products and services. If you would like to receive that information, please let us know using the following options:

Business enquiries: If you have a non-sales related query please call us on (+44) 0113 388 4300

Please read our privacy notice , which explains who we are, how we collect and use your personal information and how you can exercise your privacy rights.

We're sorry, your request failed. Please try again in a little while.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.