Tue, Oct 15 2024
Credit availability and financial accessibility are swiftly rising to the top of the finance world's agenda items. People of all circumstances and backgrounds have reported that it is considerably more difficult to obtain credit products or have loans accepted, especially in the UK.
According to recent research, 78% of individuals between the ages of 18 and 34 have had a loan application denied, according to Tink, a platform that provides payment services and data enrichment. Twelve percent of those questioned why they had been turned down for a loan said they didn't have enough credit history, and eleven percent said they couldn't provide enough documentation of their financial history.
Additionally, Tink found that younger individuals are giving up on "arduous" loan applications because they had little patience for any kind of friction. This suggests that they could not be taking advantage of the financial services that are accessible to them.
According to Tink's poll of 1,000 UK customers, 22% of borrowers between the ages of 18 and 34 gave up on their loan application and switched lenders because they found the application process to be too onerous. However, 20% of those surveyed claimed to have the necessary paperwork when applying for a loan, but they gave up since they had to submit it by hand (i.e., print it out and mail it).
These conclusions are corroborated by another Tink survey of 200 UK lenders, which reveals that 36% of lenders identify manual income verification as the stage in the loan application process when they observe the greatest drop-off.
In a similar vein, the study indicates that lenders may incur expenses and waste time due to laborious manual procedures. In their own risk decisioning process, thirty-two percent of lenders name manual income verification as the most time-consuming stage, while twenty-five percent say the biggest expense they incur is document validation, which involves gathering application information and determining its legitimacy.
"Using solutions for data-driven risk decision making"
Director of banking and lending at Tink, Jack Spiers, stated: "Our research clearly identifies a barrier to borrowing for younger generations. In addition to having to deal with onerous application procedures, many people are having their loan applications denied for reasons that seem to indicate that their financial assessments were done without sufficient thought.
Younger age groups suggest that one way to get over these obstacles is to be willing to allow lenders to see transaction data from their bank accounts in exchange for easier loan application processes and a higher possibility of approval.
Actually, according to a survey of 18 to 34-year-olds, 40% would allow lenders to digitally examine transaction data from bank accounts in order to streamline the application process, and 57% would rather have loans customized to their individual needs.
Tink research indicates that lenders are aware of the need for change, despite the perception that the financial sector moves slowly when it comes to customizing specific sections of offers and application procedures to meet client expectations.
Seventy-eight percent of lenders questioned feel that improving risk decisioning models is essential to provide a more accurate picture of people's finances, and that lowering friction in the lending application process is critical and would provide them a competitive advantage.
Additionally, Spiers stated: "It's critical that lenders use data-driven risk decisioning tools to provide impartial and accurate affordability assessments and to eliminate the hassles involved in human application submissions. Furthermore, it helps more than simply the final user. By lowering operating expenses and increasing customer acquisition through higher success rates, adopting these approaches can benefit lenders as well.
Leave a Comment