Affordable Credit Challenge

What was the Affordable Credit Challenge?

A challenge prize to find innovative technological solutions to increase access to affordable, responsible credit, bringing together community lenders and fintechs in partnership. It was backed by HM Treasury and delivered by Nesta Challenges.

Six partnerships were awarded development grants of between £125,000 and £150,000 to develop their solutions.

The three winning partnerships were awarded additional cash prizes of at least £200,000 in spring 2020.

Why did we run the Challenge?

Most of us rely on borrowing in one form or another but the inability to access fair and affordable credit is a challenge faced by millions of people across the UK. Community lenders don’t have the same resources and access to technology as high-cost credit providers – as a result they struggle to reach and serve all those who could benefit from their affordable loans. By bringing together community lenders with fintech businesses we sought to create a better marketplace – making affordable credit available to more of those who need it.

What were we looking for?

The aim was to increase access to responsible, affordable credit provided by community lenders through:

Creation of partnerships between community lenders and fintechs.
Supporting a range of different solutions, demonstrating the role of technology in helping to achieve this goal.

8 million people in the UK...

are estimated to use credit to cover everyday expenses, which is why making this credit responsible and affordable is crucial

Over £1 billion worth of loans annually...

are offered by credit unions, CDFIs and other community lenders, serving almost 2 million people

22% of UK adults have less than £100 in savings...

Payday lenders, rent-to-own firms and home credit providers prey on people in need of credit

Impact of the Challenge

40 applications from community lender-fintech partnerships.
Six finalist partnerships developed innovative technological solutions to increase access to affordable credit.
The majority of finalists are still working in long-term partnerships.
Finalists developed their solutions faster and made their organisations more sustainable as a result of participating in the challenge.
More than half of the finalists stated they would not have developed their product had it not been for the prize.
100% of finalists report they had improved their understanding of their users and their business skills as a result of participating in the prize.
50% of finalists were able to secure additional funding and partnerships as a result.

Winners

Capital Credit Union, Nivo and Soar

Capital Credit Union, Nivo and Soar created a mobile app to make it easier for people to join and engage with a credit union. By using the latest digital financial technology the credit union was able to reach new audiences – particularly financially excluded and younger people – providing the opportunity to gain access to fair, affordable credit.

Fair for You and EML & Lending Metrics

Fair for You and EML & Lending Metrics created revolving loan facility to provide buffer credit specifically in the school holidays, when low-income households often use high-cost, short term credit to cover spikes in grocery bills when children do not have school dinners provided.

Police Credit Union Ltd and Credit Kudos

Police Credit Union Ltd and Credit Kudos designed a reward loan solution that uses open banking to monitor a borrower’s behaviour and reduces the interest rate they pay over time as they develop healthy financial habits – helping those in the police, armed forces and other protective services with a poor credit rating to access affordable credit.

Finalists

Central Liverpool Credit Union (CLCU) andNestEgg’s solution uses open banking to look at someone’s spending, borrowing and saving to provide an alternative credit scoring system and therefore helping those previously considered too risky to be offered credit.

Hoot Credit Union and Incuto designed a single application portal for a consortium of credit unions offering a range of products, using credit bureau and open banking data to make it easier for people to apply for credit, and get immediate decisions on loans – enabling them to offer the same speed as payday lenders.

Salad Money and Credit Kudos’s solution 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 decision-making and offer access to low cost credit for public sector workers – such as NHS staff – who use high cost credit more than average consumers.