Equifax UK has launched Affordability 360, a new solution for lenders.

It mixes bureau insights with real-time transaction data accessed via Open Banking and statistical estimates in order to improve affordability assessments and customer outcomes.

Industry research from the credit reference agency found that 24% of organisations relied on a customer’s self-declaration to assess expenditure, while 19% rely primarily on credit bureau insights and 16% rely on Office for National Statistics (ONS) data. Equifax UK argues that for improved accuracy it is important to rely on a number of data sources.

In response, Affordability 360 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 customer income and expenditure.

MORE APPROVALS FOR LOW AFFORDABILITY CUSTOMERS

Equifax estimates that using the data combination is likely to be more predictive of customers defaulting than using declared income and ONS calculations alone, while the solution could result in a 29% uplift in lender approvals for low affordability customers, it claims.

“more robust and accurate affordability assessments [are] a top priority for lenders”

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 customer affordability, helping to boost financial inclusion and responsible lending decisions.”