Lending platform Freedom Finance has launched Fusion Score, an open banking enabled score that creates a single metric that interprets a customer’s eligibility based on both credit and transactional data.
A first for the lending industry, Fusion Score aims to help lenders and consumers with current credit scores that are redundant due to COVID-19.
Freedom Finance has partnered with AccountScore to develop the product.
The Fusion Score will unlock better rates or a smoother journey for those with established credit histories.
For those with lower credit scores or thin credit files, the inclusion of transaction data, via open banking, can help identify and secure a reasonably priced product which improves their financial health in the long run.
This is also the case for those that, due to circumstances such as divorce, find it difficult to obtain credit as the current systems tend to exclude them.
The Competition and Markets Authority (CMA) published a report in 2016 on the UK’s retail banking market, which found that older, larger banks do not have to compete enough for customers’ business, while smaller and newer lenders find it difficult to grow and access the market.
Open banking was proposed as a solution, allowing customers and small to medium enterprises (SMEs) to share their current account information with other third party providers.
Jake Ranson, chief customer officer at Freedom Finance, said: “We set out to leverage the huge opportunity that open banking provides, finding new ways to help consumers gain access to quality credit, while enabling fair and responsible lending.
“We see too many customers fall short of acceptance for credit products due largely to the absence of data as opposed to the presence of a reason to reject them.
“The Fusion Score has been designed to help address that and is what we envisaged the regulator was hoping to see from the industry.
“The Fusion Score changes the whole dynamic of applying for credit by bringing open banking technology to the top of a multi-product pre-qualification journey for the first time.
“As the name suggests, the score itself is a single metric which interprets a customer’s eligibility by harmonising credit data with insights extracted from their consented transaction data.
“The customer receives a personalised score and a transparent explanation of all the factors driving it; lenders receive an enriched application allowing them to make offers to segments which they previously could not access.”
Emma Steeley, CEO at AccountScore, said: “In another first for AccountScore, we have worked with Freedom Finance to unlock the power of open banking for customers who are still assessing their options before making an application.
“This initiative allows our service to benefit consumers at the very start of their search for credit, as well as supporting the growing number of lenders who are using our enriched transaction data to get an up-to-the-minute view of a potential customer’s finances.”
Ranson added: “All consumers can benefit from the Fusion Score.
“Those with established credit histories may find the Fusion Score unlocks better rates or a smoother journey, while those with lower credit scores, thin credit files or whose credit history has been impacted by a life event such as divorce could find that their transaction data surfaces a reasonably priced offer which improves their financial health.”