In the UK, outdated data is used to make millions of credit decisions. For many, this is an issue. About 5.6 million adults in the UK have very little credit history, making them “credit invisible”. Additionally, 12.1 million people recently experienced credit difficulties, according to the FCA. This does not help the risk assessment process for UK lenders.
This can be fixed by using real-time bank data. A more up-to-date and thorough analysis of a borrower’s finances is available to lenders. The use of this bank data by UK lenders to make quicker, more equitable, and more precise credit decisions is described in this guide.
📚 Guide to Alternative Credit Scoring Method
Understanding Risk Assessments in Lending
A financial institution’s method for determining a potential borrower’s creditworthiness is called a lending risk assessment. It is an official evaluation of the probability that a borrower will not fulfil their loan commitments. The borrower’s credit history, present income, current debt (measured by the debt-to-income ratio), and the offered collateral are usually examined during this process. Quantifying the risk will help you decide whether, how much, and at what interest rate to lend.
Doing this well is the main way lenders meet these rules. It also:
- Protects the lender from financial losses.
- Ensures the lender follows all regulations.
- Promotes stable and fair lending, which is good for the whole financial system.
Challenges with Traditional Risk Assessment Methods
Data is often old
Credit reports can be 30 to 60 days old and are “backward-looking.” This indicates that lenders are using outdated data that does not reflect the customer’s current circumstances when making decisions.
Some people are invisible
“Thin-file” people, such as recent immigrants or gig economy workers, are not served by this outdated system. Because these individuals have little to no credit history, lenders are given an incomplete picture.
Warning signs are missed
Traditional scores don’t reflect daily, in-the-moment behaviour. They are unable to recognise fresh indicators of financial strain, such as an abrupt decline in earnings, an increase in gambling, or a new dependence on overdrafts.
Good customers can be rejected
Models can be unfair, penalising someone with a high, stable income just because of an old, resolved issue. This means lenders miss out on good customers while increasing their own risk.
What is Open Banking for lending?
It’s a secure way for lenders to see your bank data, with your permission. This helps them make faster and fairer credit decisions.
Is sharing my bank data with a lender safe?
Yes. You use your own bank’s secure login. The lender only gets “read-only” access and your passwords are never shared.
How Bank Data Transforms Lending
Using real-time bank data is a big change for risk assessment. With a customer’s permission, lenders can securely access a live feed of their transactions. This gives an immediate and much clearer view of their finances, which in turn helps lenders make better decisions and not miss out on good customers.
- Lenders can see 12-24 months of live transactions, not just an old summary.
- They can instantly check income by seeing salary payments.
- They can understand spending habits by seeing where money goes.
This helps them see a customer’s true cash flow. It also saves time, as lenders do not have to go through tonnes of paperwork.
Key Bank Data Points That Matter for Risk Decisions
This new type of risk assessment leverages specific data points that traditional models miss. Lenders can now analyse:
- Income Stability: Identifying the frequency, regularity, and source of all incoming funds, not just a single stated salary.
- Expense Categorisation: Automatically identifying fixed costs (rent/mortgage, utilities) versus discretionary spending (dining, subscriptions) to accurately calculate affordability.
- Cash Flow Patterns: Assessing the average daily balance and identifying patterns of financial buffer or, conversely, “near-zero” balances before payday.
- Overdraft Frequency: Understanding the reliance on overdrafts or returned payments as an indicator of financial distress.
- Debt Repayment Behaviour: Confirming payments to other lenders or credit facilities that may not have yet appeared on a credit report.
How to Access Client Data: The 5-Step Consent Flow
Here is the simple 5-step process UK lenders use to get a client’s bank data with their consent. This process is secure and puts the customer in control.
- Lender Requests: Your application asks the customer for permission to securely view their bank data for the credit check.
- Customer Consents: The customer clicks “Agree” and is shown a secure list of UK banks. They select their own bank.
- Secure Bank Login: The customer is sent directly to their own bank’s official app or website. They never share their password with the lender.
- Customer Approves: The customer logs in to their bank and confirms the request (e.g., “Share 12 months of transactions with [Lender Name]”).
- Data is Shared: The bank then sends a read-only copy of the financial data securely to the lender (or their technical partner) for analysis.
This process is fast and simple. It lets you collect clients’ data quickly, making your risk assessment efficient.
Benefits and Results of Bank data for risk assessment
The benefits of using bank data come from a new, smarter process. Instead of relying on a single, old score, lenders get a clear, step-by-step view of a customer’s real-time finances.
This data-driven process delivers clear advantages at each step:
Instant Verification
The first step is to instantly verify the customer’s income and identity. This process removes the need for manual paperwork like payslips, saving time for both the lender and the customer.
A Clear Spending Picture
The system automatically categorises all transactions (e.g., “Groceries”, “Rent,” “Utilities”, “Gambling”). This gives the lender a fast, clear, and accurate picture of where the customer’s money actually goes.
True Risk and Affordability Analysis
Lenders can see a customer’s real-time cash flow, calculate their true disposable income, and identify all their debt repayments. This also helps spot early risk signals that credit scores miss, like heavy overdraft use or new gambling habits.
Faster, Fairer Decisions
This clear, verified information allows lenders to make a better decision. They can safely approve more good customers (like those with thin credit files) and reduce default risk at the same time.
Does bank data replace my credit score?
Not always. It is often used with your credit score to give the lender a more complete and current financial picture.
Why do lenders want my bank data?
To get a real-time view of your income, expenses, and affordability. This helps them make a more accurate decision. Also, it helps for risk assessments.
How Finexer Can Help
Finexer makes this transition simple. We provide developer-friendly APIs that are fully compliant with FCA regulations.
Our solution allows you to:
- Connect to 99% of UK banks for instant, consent-based data.
- Achieve faster onboarding by instantly verifying income and affordability.
- Streamline KYC/AML compliance in one simple, automated flow.
- Use our white-label solution to integrate seamlessly into your existing customer journey.
Ready to transform your risk assessment? Contact our team to learn how our solution can help your lending business make faster, more accurate decisions.
Conclusion
Real-time bank data has become essential for modern UK lending. Traditional credit scores paint only part of the picture—missing vital context, overlooking reliable borrowers with thin credit histories, and sometimes misrepresenting risk altogether.
By accessing live, consent-based transaction data, lenders gain a complete and up-to-date understanding of a customer’s financial position. This shift enables faster assessments, fairer outcomes, and more informed lending decisions.
Partnering with an open banking API provider like Finexer allows lenders to integrate this data seamlessly into their workflows, transforming how creditworthiness is evaluated. The result is a lending process that’s not only more efficient but also more transparent, inclusive, and aligned with today’s financial reality.
Get in touch with our team and improve your risk assessment process with Instant Bank data fetch!