The drive for greater financial inclusion and improvement in user experience surrounding credit facilities, coupled with the ever-changing regulatory landscape, is spearheading evolution in the assessment of consumer lending affordability.
Affordability assessments are no longer fit for purpose when they are rigid and without nuance, or involve a process that is time consuming, complicated, and reliant on excessive and often non-relevant information. Until now, there has been no fixed standard in what an affordability assessment should entail, and consumers have suffered from the fatigue and frustration generated through not being able to familiarise themselves with a single standardised form.
In response to the changing needs of the industry, the Money Advice Service (MAS) launched the ‘Standard Financial Statement’ (SFS) in March 2017. The SFS is a common framework to be used by debt advice providers and creditors to provide a more accurate picture of consumer income, outgoings and debt.
According to the to the Debt Advisory Centre, nine million adults think they owe too much and four and a half million people find it difficult to keep up with essential bills. The introduction of a cohesive approach to affordability is aimed at tackling this issue, understanding a person’s financial heath and commitments without requiring detailed intrusive questions to clarify their spending budget.
Affordability assessments are fundamental to responsible lending, as set out in the Financial Conduct Authority’s (FCA) Consumer Credit Sourcebook. In July, the FCA published a consultation paper “Assessing Creditworthiness in Consumer Credit”, which seeks to clarify what is expected of firms when assessing affordability.
Grant de Leeuw, Global Sales Manager at TALKINGTECH UK says: “With over 700 organisations in the UK signing up as members to adhere to the SFS and its code of conduct, it’s fantastic to see such adoption to a shared income and expenditure (I&E) format. By ensuring creditors, utilities and debt advice companies are working off the same statement, it paves the way for the consumer to take control of their financial situation and we hope in future, reduce the need for completing multiple I&E forms with each organisation”.
Adopting the SFS gives more control to customers through familiarity and user experience. It is also important to give customers a choice as to how they provide the information and when. Increasingly customers expect to be able to access digital services across all platforms, and affordability assessments are no different. They also expect to be able to begin submitting information to a form on one devices, and then to complete the form later on a second platform seamlessly. Service providers therefore need to consider solutions that tailor the online experience to these digital natives.
Companies such as TALKINGTECH provide digital, self-service technology that makes affordability assessments more accurate and efficient. TALKINGTECH is a global leader in customer engagement and payment technology solutions for some of the world’s leading financial services organisations, including Vodafone, EDF Energy and HSBC.
“Through the adoption of digital I&E capture tools, we have seen consumers log into their portal up to three times before submitting to ensure they have the most accurate data rather than assumptions when pressured or worse led, by an agent. By empowering the customer to take ownership for completing the SFS in their own time on their chosen device, it allows the consumer to take the first step to better understanding their own financial situation” says Grant de Leeuw.
bobsguide was in attendance at TALKINGTECH's "Future of Affordability" roundtable last week. Visit our sister website PaymentEye next week for exclusive video coverage of this event.