Driving financial inclusion through education, data, technology and innovation

Access to credit services is a fundamental pillar of any developed economy, and it can also provide individuals to raise their living standards. But for a safer and fairer lending environment, lenders need to have the best sources of data available to them.

Michal Lodej: What is your view on today’s current market and what can businesses and consumers expect in 2024? 

Jose Luiz Rossi: There is a feeling that we are through the worst of it, and we are expecting a recovery, but it will be a slow recovery. There will still be big adjustments to make for both businesses and consumers including understanding that while interest rates may normalise, they won’t go down to the levels we’ve seen in the last 10 years again.

What we do see in our data, however, is strong demand for credit. It’s the supply that hasn’t been there in the last 12 months. In addition, we are seeing people making smart decisions about consolidating debt. Searches for debt consolidation products increased by 8% last month compared to this time last year. Both are very good signs for the market.

Unfortunately, we were too slow in the UK and in Europe to react to inflation. However, after 30 years of very low inflation, central banks and governments had no need to flex their fiscal muscles and got out of shape. Now I think we’re on the right path, but we certainly cannot expect any overnight solutions.

ML: How do you think the economic environment has affected consumers?

JLR: It’s certainly been a challenging time for many people. It is important to remember it is not the wealthiest people that feel the pressure, it’s those in the poorer households that are impacted the most. The picture in the middle-income households has been mixed. People have been using their savings, which were built up through the experience of lockdowns during Covid and that has helped ease the burden of rising inflation and then changes in the cost of borrowing.

If we compare the current situation with the crash of 2008, there was no stock of wealth or savings to help consumers get through that period.

ML: Why is promoting financial health and ‘credit awareness’ so important in today’s current market? 

JLR: We always need to encourage people to talk about finances and credit more because most people will progress through their life using some form of credit. Whether it is to pay for studying, for housing, or a car – credit is used for financing life’s big moments that improve a person’s well-being. All developed economies have a wide range of credit options available but choosing one that is right for us, isn’t something that we learnt in schools.

By promoting credit awareness and how to manage your finances, we’re drawing attention to an aspect of life which is very important for society. That is why campaigns like Credit Awareness Week are so important. It plays a key part in helping drive that ongoing awareness and education. And it is even more important right now if you consider the UK economy won’t be buoyant for the next twelve months.

When people ask me, what Experian does, I like to say that we’re in the business of solving the problem of asymmetry in the market. What I mean by this is, on one side we have consumers who think they know everything about their spending habits and finances, and on the other side, we have several lenders each knowing a small part about a particular consumer’s financial story. Experian is in the middle trying to help those financial institutions paint the best possible picture of that person so they can give them a balanced and fair credit option. So, we have a fundamental role in society for eliminating asymmetry in the market.

ML: Do you think businesses are currently doing enough to support financial health in the UK?

JLR: I think we could all do more. Our Credit Awareness Week survey shows that British businesses are aware of what they need to do to support their customer’s financial health but cite some key challenges. Nearly 60% admitted they could be doing more to educate people on how to manage their finances and 74% are also worried about financial security and fraud. A lack of budget, internal resource or not having the right technology in place though is stopping them from providing the right services.

However, it is not just the responsibility of businesses to support financial health in the UK. It should be a priority for us all. Nobody wants to have people on the wrong credit - whether they’re on the credit plan they deserve to be on or whether they have borrowed too much and are now struggling to pay back their loans back.  We all have a job to do to ensure

people are using a product which is well explained, in plain English and with nothing hiding in the small print.

Overall, I think there is a good traction in society in terms of supporting financial health. However, this is a journey and it’s not something that we can just complete with the click of a finger. I believe we can do more in all the areas that impact financial health including education, access to the right services and protection from financial crime and fraud. 

ML: What can our industry do to support businesses and consumers?

JLR: At a base level, the industry needs be continually educating businesses and people on how the finance and credit markets work. Well informed businesses and people will make the right choices for themselves. That is why we continue our work under our flagship United for Financial Health CSR programme. To date, the programme has made more than 113 million connections worldwide (44 million in the UK) through partnerships like The Big Issue, National Numeracy, National Literacy Trust and The Mix.

Over and above that, we need to focus on driving innovation and industry collaboration to provide businesses and people with the right products and services that help improve their overall financial health.

One of those ways is investing and innovating in data. We always tell our clients that the more you know about your customer base, the better you’re going to be able to serve them and match them with the right products. So, we have been innovating in this space and bringing new types of data to market and offering new kinds of analytics to our clients so they can understand their consumer profiles better. That’s our contribution and we tell our clients continually, get to know your clients better and understand their needs so that you can tailor a better offering to them. If you have that kind of approach, you’re going to have a better business.

Industry collaboration is also key. Take co-operation in the financial crime space. We want the industry to work together and share data to transform the approach to financial crime detection and prevention. Right now, there are blind spots, and we only have a partial view of risk. If we worked together to create one single national fraud and economic crime database, that will enable us to identify bad actors and fraud trends more quickly and efficiently.

With the recently passed Economic Crime and Transparency Act, this is now a possibility. There is a lot of work to be done but our vision is to start building a fraud and AML bureau that builds on Experian’s expertise with public authorities and financial institutions all coming on board.

ML: What is your perspective on the most recent FCA’s credit market study?

JLR: We are supportive of the findings. We obviously provided our thoughts through the consultation process, and we are broadly happy with where they landed with it. We share the FCA’s view that there are opportunities to improve the operation of the credit information market in the UK, to ensure the UK financial system remains one of the most effective, innovative and competitive in the world.

ML: What key trends are you seeing in the credit and finance industry in 2024?

JLR: There are many trends you can talk about but what I am most passionate about is the part technology plays in the industry and our evolution. Experian has evolved from its origins as a credit bureau into a data and analytics company, using advanced analytics and the latest tech, like Machine Learning and AI to help inform lending decisions at pace and scale.

When you think about our role for our clients, it is to provide the symmetry between the lender and the borrower. To achieve that, we need to provide a fuller picture of their customers so they can lend more responsibly and ensure they are meeting their obligations to serve their customers responsibly as well.

To do that, we are continuously looking for and adding in new data sources, like BNPL data, payroll information and opt-in transactional information provided through open data sources – including our direct-to-consumer business. Technology is a big enabler of these sources being added in quickly, efficiently and seamlessly and ultimately changing the way the lending process works for the benefit of everyone.

ML: AI has grabbed the headlines all through 2023, how is Experian using AI?

JLR: We’ve been using AI for some time now. It is extensively used in our fraud product portfolio which incorporates various aspects of AI/ML, computer vision, and biometrics analytics as well as our Ascend platform, allowing non-technical users to perform natural language queries.

What’s grabbing everyone’s imagination though is the potential of generative AI. Everybody’s experimenting in this area, and we are training our employees in the concept of generative AI and we’re looking at opportunities to use it from internal productivity through to technology in our support centres and product development.

For me this next evolution of AI is as important as the birth of the Internet. There have been many technological advancements since the internet, none are of as much consequence as the Gen AI. It is transformational.

ML: Have you seen anything from other territories within Experian’s reach that can teach us about the UK market?

JLR: We are always looking at different markets to learn from and Experian operates in over 30 countries. So, we can always take the best from each country and bring these ideas to other regions. What is important to understand though is also the specificities of every country.

Take the UK and Brazil. Even though the population of the UK is a third of the population of Brazil, the Brazilian market has 10 times the number of unpaid accounts than in the UK. So here we are more focused on understanding pre-delinquencies but over in Brazil its more about reclaiming debts.

For the UK, while we are one of the most sophisticated markets that Experian operates in, there are still challenges. Being in a sophisticated market puts pressure on having the best possible data so that we can help lenders to really serve their consumers in the best way.

ML: What else is Experian focusing on in 2024?

JLR: Support Hub will continue to be an important focus for 2024.It is something which we’re very proud of because this is a very good example of how innovation in a data-centric company can help society.

There are roughly 16 million people in the UK living with some kind of special need, and financial institutions do not have enough information about how to serve them appropriately. Imagine telling someone who’s deaf to call a call-centre on the telephone or telling a customer who is a wheelchair user to visit a branch without an accessibility ramp; how would that make them feel? Because their needs are not understood properly, we know that people with special needs avoid looking to change their credit products.

That is why we launched Support Hub late last year. It is a free platform that allows consumers to share their access needs with multiple organisations in one go. It was three years in the making and couldn’t have happened without founding partners HSBC UK, Nationwide Building Society, Tesco Bank, NewDay, Co-operative Bank and Ovo.

The focus for this year is getting new players and partners involved and working with us on the platform. It will only improve the initiative. Most of these are financial service providers but any company that has a relationship with consumers and wants to provide a service which is tailored to their customers’ specific needs can gain from Support Hub and make an improvement to UK society.

We are addressing a real-world problem, helping people with support needs to get access to services in a way that is relevant and convenient for them – reducing stress and improving the relationship between the service provider and the customer in the process. It’s such a great, but simple concept and we’ve had a really positive reception since it launched.