Affordable Credit Challenge

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What was the Affordable Credit Challenge?

The challenge aimed increase people’s access to affordable, responsible credit through innovative tech solutions. It also sought to bring community lenders and fintechs together in partnership. It was backed by HM Treasury and delivered by Challenge Works.

The aim was to increase access to responsible, affordable credit provided by community lenders through:

Creation of partnerships between community lenders and fintechs.
Supporting a range of different innovative solutions, demonstrating the role of technology in helping to achieve this goal.

Why did we run the Challenge?

Most of us rely on borrowing in one form or another but the inability to access fair and affordable credit is a challenge faced by millions of people across the UK. Community lenders don’t have the same resources and access to technology as high-cost credit providers – as a result they struggle to reach and serve all those who could benefit from their affordable loans. By bringing community lenders and fintech businesses together we sought to create a better marketplace – making affordable credit available to more of those who need it.

What happened?

Six partnerships were awarded development grants of between £125,000 and £150,000 to develop their solutions.
The three winning partnerships were awarded additional cash prizes of at least £200,000 in spring 2020.

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This challenge was funded by

Impact of the Affordable Credit Challenge

40 applications from community lender-fintech partnerships.
Six finalist partnerships developed innovative technological solutions to increase access to affordable credit.
The majority of finalists are still working in long-term partnerships.
Finalists developed their solutions faster and made their organisations more sustainable as a result of participating in the challenge.
Three out of six finalists stated they wouldn’t have developed their product had it not been for the prize.
All the finalists report they improved their understanding of their users and their business skills as a result of participating in the prize.
Three out of six finalists secured additional funding and partnerships as a result.

The winners

Capital Credit Union, Nivo and Soar

Capital Credit Union, Nivo and Soar created a mobile app to make it easier for people to join and engage with a credit union. Using the latest digital financial technology the credit union was able to reach new audiences – particularly financially excluded and younger people – providing the opportunity to gain access to fair, affordable credit.

Two women and a man stand around a trolley in the middle of a supermarket

Fair for You and EML & Lending Metrics

Fair for You and EML and Lending Metrics created a revolving loan facility to provide buffer credit specifically in the school holidays. This is when low-income households often use high-cost, short term credit to cover spikes in grocery bills when children do not have school dinners provided.

Two men in police uniform stand with their backs facing the camera in a tube station

Police Credit Union Ltd and Credit Kudos

Police Credit Union Ltd and Credit Kudos designed a reward loan solution that uses open banking to monitor a borrower’s behaviour and reduces the interest rate they pay over time as they develop healthy financial habits – helping those in the police, armed forces and other protective services with a poor credit rating to access affordable credit.

About the Challenge

8 million people in the UK…

are estimated to use credit to cover everyday expenses, which is why making this credit responsible and affordable is crucial

Over £1 billion worth of loans annually…

are offered by credit unions, CDFIs and other community lenders, serving almost 2 million people

22% of UK adults have less than £100 in savings…

Payday lenders, rent-to-own firms and home credit providers prey on people in need of credit

The finalists

Central Liverpool Credit Union (CLCU) and NestEgg

Central Liverpool Credit Union (CLCU) and NestEgg’s solution uses open banking to look at spending, borrowing and saving data to provide an alternative credit scoring system – helping those previously considered too risky to be offered credit.
Hoot Credit Union and Incuto

Hoot Credit Union and Incuto designed a single application portal for a consortium of credit unions. It offers a range of products, using credit bureau and open banking data to make it easier for people to apply for credit, and get immediate decisions on loans – enabling them to offer the same speed as payday lenders.
Salad Money and Credit Kudos

Salad Money and Credit Kudos’s solution is an innovative way to offer affordable loans that are repaid using payslip deductions. They use open banking and artificial intelligence to improve credit decision-making and offer access to low cost credit for public sector workers – such as NHS staff – who use high cost credit more than average consumers.