Affordable Credit Challenge

Supporting tech solutions to increase access to affordable, responsible credit

What was the Affordable Credit Challenge?

The Affordable Credit Challenge supported partnerships between UK community lenders and fintechs developing innovative technological solutions that increased access to affordable, responsible credit. It was backed by HM Treasury and delivered by Nesta Challenges.

We awarded development grants of between £125,000 and £150,000 to six community lender/fintech partnerships. From these, we selected three winning partnerships in Spring 2020 and each of these received cash prizes of at least £200,000.

Why did we run the Challenge?

Most of us rely on borrowing of one form or another, whether loans, credit card debt or mortgages. But the inability to access fair and affordable credit is a challenge faced by millions of people across the UK.

Credit unions, CDFIs and other community lenders offer an affordable alternative to high cost credit, such as payday loans. They comprise a significant market, making over £1 billion worth of loans annually and serving almost 2 million people. However, they compete with high cost credit providers with more resources and better access to technology. This means they can struggle to reach and serve all those who could benefit from their services.

Meanwhile, the UK’s world class fintech sector continues to flourish, challenging traditional business models in banking, payments, personal investing and small business lending to better serve customers.

We believe a better personal lending market is possible – with affordable credit available to more of those who need it – through combining the values and reach of the community lending sector with the insights and capabilities of fintech businesses.

What were we looking for?

The ultimate objective of the Challenge was to widen people’s access to responsible, affordable credit provided by community lenders. To help achieve this, the Challenge supported partnerships between community lenders and fintechs who are working together to use technology to address challenges or opportunities faced by community lenders. The Challenge supported a range of different solutions that demonstrate how technology can help 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

The finalists in the Affordable Credit Challenge

A mobile app using the latest digital financial technology to make it easier for people to join and engage with a credit union, giving new audiences – particularly financially excluded and younger people – the opportunity to save and gain access to affordable credit.

Using 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.

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, and get immediate decisions – enabling them to offer the same speed as payday lenders.

 

 

A revolving  loan facility  to provide buffer credit specifically for an additional frozen food shop in school holidays, when low income households often using high cost short term credit to cover spikes in grocery costs when children do not have school dinners provided.

A reward loan solution that uses open banking to monitor a borrower’s behaviour and reduce 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.

An innovative way to offer affordable loans that are repaid using pay slip 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 – such as NHS staff – who use high cost credit more than average consumers. 

Final outcomes

34% of finalists...

developed their product specifically for the prize, whilst over 50% stated they would not have developed their product had it not been for the prize

50% of finalists...

were able to secure additional funding, partnerships, clients, publicity, or attract new investments for their solutions through the Challenge process

100% of finalists...

developed their solutions faster as a result of participating in the competition and the three winners have brought their solutions to market within 12 months

The team

Chris Gorst

Challenges Director

Isobel Scott-Barrett

Assistant Programme Manager

Shae Harmon

Communications Manager

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