Open Banking, credit bureau data can ‘inform’ customer vulnerability

Using Open Banking data in conjunction with credit bureau data can help lenders make more informed decisions about vulnerable customers and demonstrate “data-informed empathy”, according to speakers from Aro, Equifax and Abound at Open Banking Expo UK and Europe.

Emma Steeley, chief executive officer of Aro, told delegates that “we can all have vulnerable characteristics at some point”.

“Certainly, where Open Banking is at its most useful, is where people are demonstrating vulnerable characteristics that can change in a matter of days, weeks. It’s not that you are always going to be a vulnerable individual,” she said.

She made the remarks during a session on the Customer Vulnerability Stage on Day One of the Expo, titled ‘The importance of identifying vulnerable customers’.

Equifax’s Stuart Holland

Moderator Stuart Holland, director of the president’s office and external affairs, Europe at Equifax, asked the panellists “Is the bureau data dead?” or “can the bureau data and Open Banking data live in harmony?”.

Dennis Sanford-Casey, principal consultant, collections at Equifax, acknowledged that vulnerability can be “transient” and that, where credit bureau data can “come into play is in customer management”.

However, he said that if the data does not identify a financial vulnerability, then a lender will “struggle to engage” with their customer.

“As a lender, as an originating company, if you want to reach out and understand your customers, you have to show you understand the position they’re in. If you can get them to engage, that allows you to go and get the consent to get the Open Banking data to then have a more informed conversation,” Sanford-Casey added.

Steeley said: “It is really about being open to using additional data sets in conjunction with the bureau data.”

She observed that while the data can “get you an incredibly long way” it is “the methods in which you look to engage that are really important in those scenarios”, which Holland referred to as “data-informed empathy”.

Asked how his firm identifies vulnerable customers, Gerald Chappell, chief executive officer and co-founder of Abound, explained that they rely “quite heavily” on bank transaction data.

“The way we see it, there are four categories of vulnerability: compulsive financial behaviours, structural unaffordability and debt spirals, a third category which is health and life events, and, finally, you have mental incapacity. Open Banking is really powerful at the top [of that list] and maybe gets a little less powerful as you go down,” said Chappell.

He told delegates: “Work out how you can get bank transaction data into the way you screen for vulnerability. It will become increasingly indefensible not to do that in the future, because the data is available and it’s incredibly effective at picking up some of the biggest financial harms.”

Download the latest Open Banking Expo and Equifax industry report, ‘How Open Banking is Transforming Lending and Credit Risk’ here.