From solutions using open banking to understand borrowers better and lend to them more effectively, to platforms making affordable credit as quick and easy to access as offerings from high cost credit providers, the six finalists are blazing a trail in how to make responsible credit accessible to those who need it, when and how they need it.
With 8 million people in the UK estimated to use credit to cover everyday expenses, making this credit responsible and affordable is crucial. Regulation has done much to curb irresponsible lending, with the notable exit of Wonga and most recently QuickQuid from the market. The UK’s community lenders – credit unions, CDFIs and others – are well placed to step up, already offering affordable credit on responsible terms (credit union APRs are capped at 42.6%). However, they have struggled to compete with the resources and technology of these high-cost credit giants (where APRs can reach 1500%). Partnerships with the UK’s thriving fintech sector, working at the forefront of innovation in financial services, have the potential to be transformative. Nesta’s recent report on partnerships supporting financial inclusion explores this in further detail.
Run by Nesta Challenges in partnership with HM Treasury, the Affordable Credit Challenge received over 40 applications from community lender-fintech partnerships, with the Judging Panel nominating six finalists to receive £150,000 each to develop their solutions. Combining the insights and capabilities of fintech businesses with the values and reach of the community lending sector, our six finalist partnerships are developing innovative technological solutions to increase access to affordable credit.
From reducing interest rates in response to customers’ responsible financial behaviour, to repayment via payslip deductions, to a revolving credit facility for a grocery shop targeting specifically ‘holiday hunger’, we’re excited to announce the finalists. Their solutions are diverse, approaching the accessibility of affordable credit from a number of directions but all focused on innovations that make lending work for those who need it.