Opinion  

The future of lending is going to be more about data

Neil Williams, LendingMetrics

Neil Williams, LendingMetrics

Those that already have it have been benefiting from what is better termed assisted decisioning’s ability to deliver optimal lending outcomes (for both the borrower and the lender) and the ease with which it permits lending to be scaled according to appetite. 

Such lenders are currently looking to take automated underwriting to the next stage: leverage the technology going forward so that it can deliver even greater value. 

Two areas that are particularly exciting in this context concern machine learning (ML) and multi-bureau credit searches. 

ML involves the use of algorithms that improve processes automatically through the mining of data. Essentially, it amounts to the formulation of best practice in an algorithm that, over time, gets better and better at doing its job. 

Up to now the only way companies had access to this sort of sophistication was to pay a data analyst to go away with their raw data and, over a period of many weeks, work out what lessons could be learnt. The result was that not nearly enough data analysis was conducted by a typical lender, which is incredibly ironic given that lenders are ultimately data-driven enterprises.

Platforms such as Auto Decision Platform by LendingMetrics, however, can empower lenders to harness their data for immeasurably better-quality decision making. A lender can set a ML process in motion – swiftly deployed using ADP – that will tell them in minutes what, for example, are the best combination of predictive values on which to base a loan decision. And there is no costly data analyst to employ.

Lenders have always aspired to be able to use multi-bureau credit checks in their decisioning. Individual bureaus tend to have their strong and weak points, so a multi-bureau search makes a lot of sense. However, the majority of lenders are limited to a single search from one of the three usual providers. Given the extra cost, two credit searches are rare, three even rarer, and only if the loan is of a size that warrants it. 

In this instance, platforms are, for the first time, making multi-bureau searches possible and affordable. At long last, on the basis of one contract, lenders can tap into two bureaux (in the case of LendingMetrics this is Equifax and Experian) to deliver a better-informed search. Combined with ADP, this power couple allows lenders to easily apply and adjust their multi-bureau strategies at will.

While these two facets of assisted decisioning are being enthusiastically embraced by the sector, there has been one other that has not had the speedy adoption that I first imagined. Open banking has not really gained the traction that was first originally thought, for a number of reasons. 

While it does deliver real-time transaction access, unlike bureau searches, it does not show missed loan instalments or previous adverse history. It also introduces several extra pages of friction to consumers, which not all of whom will push through. Furthermore, unlike open banking, credit searches always deliver a 100 per cent response.