Credit Kudos, has been announced as a double finalist in Nesta Challenges’ Affordable Credit Challenge, using open banking to help community lenders support even more borrowers, particularly those in the public sector.

Originally announced in the 2018 Budget by the then Chancellor, Philip Hammond, the Affordable Credit Challenge is run in partnership with HM Treasury. It is a £1.5 million prizethat encourages UK fintechs and community lenders to work together to ensure people are able to access alternatives to high-cost short-term credit. At present, high-cost lenders have access to data and technology that community lenders often do not, making it difficult for them to compete. Through these partnerships, Credit Kudos hopes to level the playing field and, ultimately, support borrowers.

The first solution Credit Kudos is a finalist for is a reward loan, developed in partnership with Police Credit Union which supports those in the police, military and wider protective services family. This product uses open banking to monitor a borrower’s behaviour and reduce the interest rate they pay as they develop healthy financial habits.

The second solution, in partnership with Salad Money, is an innovative way to offer affordable loans that are repaid using payslip deductions. This is achieved by using open banking and artificial intelligence to improve credit decisioning and offer access to low-cost credit for public sector workers, including NHS staff.

Finalists of the Affordable Credit Challenge will each be awarded £150,000 to develop their solutions further over the coming months. The winners of the Challenge will be selected in Spring 2020 and will receive at least an additional £200,000.

Chris Gorst, Head of Better Markets at Nesta Challenges, said “We’ve been delighted to see so many fintechs and social lenders uniting to develop innovative ideas to transform the personal lending market for the better. We’re looking forward to working with the finalists to make their concepts a reality and, ultimately, making it easier for people to access affordable, responsible credit when they need it.”

Freddy Kelly, CEO of Credit Kudos, said “Credit unions and community lenders provide an invaluable service to often overlooked or harder to reach customers. Working with our challenge partners, we will deliver two exciting new propositions, creating a blueprint for adoption across the entire sector. To date, new technology and data have been out of reach to many of these firms making it harder to compete with larger, high-cost credit providers. We’re thrilled to have been awarded two finalist places and look forward to processing the first loan applications.”

Paul Norgrove, CEO of Police Credit Union, said “We exist to provide affordable loans for our members and always want to treat them as individuals – not just a credit score. Our reward loan solution, created with Credit Kudos, will help us support even more members and reward them for healthy financial behaviours. Using open banking derived scores, the solution will automatically adjust the interest a borrower pays during the life of a loan. This means borrowers from the police, military and wider protective services family can proactively and positively impact their own financial situation.”

Tim Rooney, CEO of Salad Money, said “We’re concerned that too many NHS employees aren’t able to access reasonably priced credit due to lenders relying on outdated credit scoring. Through Credit Kudos, we want to change this and believe that by using open banking data we’ll be able to lend to even more people who previously might have been unfairly turned down for credit. We are delighted to be chosen as a finalist for this Challenge and we hope our solution will give even more NHS employees access to affordable credit, preventing them from getting caught in cycles of debt with high-cost lenders.”

Eileen Halligan, CEO at Central Liverpool Credit Union, said “We are delighted to be finalists in the Affordable Credit Challenge. Community lenders, relying on traditional credit bureau data, are having to decline borrowers considered marginally too risky to be offered credit.”

“We believe our work with NestEgg, to develop user-friendly financial health indicators, will allow us to make better informed and fairer lending decisions. More importantly, reflecting back the financial health indicators to the consumer enables our members to take control of their spending, helping them make informed choices and widens access to affordable credit.”

David Batten, CEO of Hoot Credit Union and Chair of Credit Unions for Greater Manchester, said “We are delighted to have been successful in our bid for funding from Nesta Challenges. This will help us progress this exciting project challenging payday lenders. By developing a new online lending brand, with attractive and socially responsible loan products, accessed through a simple application process with immediate decision making, we will bring the benefits of credit union loans to those who need them most, when they need them most.”

Over the next five months, the finalists will work with Nesta Challenges and HM Treasury to develop its solutions, also receiving non-financial support. Three of the finalists will go on to be named winners in spring 2020, receiving a further £200,000 each to invest in their idea.

Out of the 41 entries received from partnerships of fintechs and lenders, the judging panel – made up of experts from the fintech and community lending industries – selected the six most promising concepts to move onto the final round.

The finalists are:

  • Capital Credit Union, Nivo and Soar
  • Central Liverpool Credit Union and NestEgg
  • Hoot Credit Union and Incuto
  • Fair for You and EML & Lending Metrics
  • Police Credit Union and Credit Kudos
  • Salad Money and Credit Kudos