Project Details
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Project: International approaches to offering lending products to those with no/poor credit history.

Company Profile

Freedom Finance is a leading UK multi-asset lending platform offering unsecured personal loans, credit cards, secured personal loans, mortgages & non-lending solutions. Its vision is to be the UK’s most thriving lending platform. It currently operates under two direct-to-consumer brands – Freedom Finance (for both personal loan products) and Freedom Mortgages.

Project Information
  • Project Area: Market Research, Strategy, Finance

  • Project team size: --

  • Learning Outcomes: Market Research, Sales & Business Development, Strategy, Research & Development

Project description, objectives:

We’re Freedom Finance. A Manchester-based company that in 2007 worked out there was a better way for people to shop for finance. Unlike many other comparison sites, we use a ‘soft search’ to find you a loan. This means that when you look for loan offers using our application process, it doesn’t impact your credit score. Not even a little bit.

Like many sectors the financial services industry in the UK has gone through significant change over recent years – the 2008 recession with its shrinking incomes, the impact of Brexit, the ever-changing political and financial services landscape, and of course more recently coronavirus. This has forced people and businesses to change the way they bank and manage their financial objectives.

While there is no escaping the fact that COVID-19 has caused unprecedented disruption to the industry, today's financial services customers were already demanding 'more choices and options, including greater personalization, faster solutions, self-service, and the ability to conduct transactions anytime and anywhere. The pandemic has only served to accelerate these trends, forcing financial institutions adopting traditional banking and lending models to transform and find new ways to deliver their services both virtually and digitally. Great news for those internet-savvy, employed individuals who are able to take advantage.

Running alongside these changes though is a growing trend for those with no, limited or poor credit history being able to access financial products at all. Traditional lenders further tightened their lending criteria significantly during covid. The controversial UK payday loan market (companies like Wonga, KwikCash, and QuickQuid) has already been driven out of the market and the reality is that there is a vastly increasing number of often vulnerable customers who no longer have any credit choices available to them. Positive credit history matters. Unestablished credit or a negative credit report can make it difficult to qualify for loans or credit cards. We know this is forcing these individuals to take more extreme measures to manage their financial future resorting to unregulated ‘loan sharks’ with an understandable link to increases in organized crime.  

Freedom Finance understands the UK industry very well but knows that other countries both within the EU and beyond must have similar challenges. We would like to be able to offer a more inclusive range of products and are looking for insight to help develop our thinking and business strategy.

For this reason, we would like to commission research on how other territories handle this same issue. Does the same challenge exist? If not, why not? How have equivalent financial services firms resolved this? Are there less stringent regulations in place? What types of products are on offer? And a strategy to face these challenges.     

Deliverables:

  • Review relevant territories of the international unsecured loans market and identify those that offer a different and more positive approach to that of the UK for individuals with no/limited/poor credit ratings;
  • Select a sample and describe the impact that political, governmental, and institutional forces have had on the development of these products and markets;
  • Identify what these more inclusive and positive solutions are, how the lending institutions involved are able to take this approach and how and why this differs from the UK;
  • Strategy to reach those territories inside the EU. 

 

Additional comment:

Freedom Finance is a leading UK multi-asset lending platform offering unsecured personal loans, credit cards, secured personal loans, mortgages & non-lending solutions. Its vision is to be the UK’s most thriving lending platform. It currently operates under two direct-to-consumer brands – Freedom Finance (for both personal loan products) and Freedom Mortgages. The mortgage business was acquired in 2016, providing greater breadth to the product portfolio with the intention of driving broader appeal. 

Freedom Finance does not underwrite the loan, it acts as a broker managing a panel of lenders. Freedom Finance works closely with lenders to ensure a broad range of products with a range of APRs is available to consumers so that the right solution can be offered depending on the specific circumstances of the individual. Headline rates are not the focus, as the approach is to match the consumer with the most appropriate lender based on their particular circumstances.

Matching of an individual with an offer is achieved through a soft search of a customer’s credit profile. A soft search does not leave a footprint on their credit profile and is used to match a consumer with lenders the consumer is most likely to be eligible for. This matching is highly sophisticated and based on many years of experience, our proprietary decision engine has ‘learned’ from all the consumer and lender data it has processed. However, technology is advancing at pace and more and more lenders are switching to an API model, so accurate results are sent back to an inquiry with greater ease. This means it is more likely consumers will be able to access a more accurate quote from lenders and brokers, thereby eroding this proof point.

Historically the business specialized in helping credit-challenged consumers. Whilst this profile of customer will always be important and catered for, the ambition is to service a broader customer base, encompassing all credit profiles & borrowing needs, from excellent to impaired, from home improvements to auto finance.