Credit Kudos and Police Credit Union win Nesta Challenges’ Affordable Credit Challenge

12 Mar 2020

Source: Credit Kudos

A reward loan solution developed by Credit Kudos and Police Credit Union was announced in the budget as winners of Nesta Challenges’ Affordable Credit Challenge, using Open Banking to help even more borrowers access responsible credit.

At present, many serving in the military and police struggle to access mainstream credit due to a thin credit file, often due to a lack of address history while on deployment, or lower or fluctuating incomes as a result of shift work. This can leave them having to turn to high-cost lenders such as payday or guarantor loans, which can result in a spiral of debt.

The Affordable Credit Challenge is a £1.5m prize, run in partnership with HM Treasury, which encourages UK fintechs and community lenders to work together to ensure people are able to access alternatives to high-cost short-term credit. At present, high-cost lenders have access to data and technology that community lenders often do not, making it difficult for them to compete. Through the partnership, Police Credit Union and Credit Kudos hope to level the playing field and, ultimately, support more borrowers.

The winning solution from Credit Kudos and Serve and Police Credit Union is a reward loan which supports those in the police, military and wider protective services family. This product uses open banking to monitor a borrower’s behaviour and automatically reduce the interest rate they pay as they develop healthy financial habits over time. The broader partnership between Credit Kudos and the Police Credit Union has already received over 1,800 completed applications, with a 15% increase in acceptance and a 30% reduction in application processing time.

Freddy Kelly, CEO of Credit Kudos, said: “We are thrilled to be winners of this prestigious prize from Nesta Challenges and HM Treasury. Credit unions and community lenders provide an invaluable service to often overlooked, or harder to reach, borrowers. But, to date, new technology and data

have been out of reach to many of these firms making it harder for them to compete with larger, high-cost credit providers.

“The solution we developed with our partner Police Credit Union will enable its members to access fairer, more affordable credit that previously possible — meaning they won’t have to resort to

high-cost borrowing. This solution will be a blueprint for what can be achieved across the entire community lending sector — we look forward to helping even more lenders support their customers.”

Paul Norgrove, CEO of Police Credit Union, said: “We exist to provide affordable loans for our members and always want to treat them as individuals — not just a credit score. Our reward loan solution, created with Credit Kudos, allows us to support even more members and reward them for healthy financial behaviours. Using open banking derived scores, the solution will automatically adjust the interest a borrower pays during the life of a loan. This means borrowers from the police, military and wider protective services family can proactively and positively impact their own financial situation.”

Today’s announcement brings the total amount Credit Kudos and Police Credit Union has won to £350,000. They were awarded an original £150,000 when they were announced as a finalist in November 2019 in order to allow them to develop their solution further.