Case studies

Plend uses open banking data to offer affordable lending

12 December 2023

Cost-of-living challenges faced by many UK households have highlighted the continued need for affordable finance – particularly for individuals who may not have a strong credit history. Plend is one of the new breed of alternative lenders that use open banking transaction data in their risk decision-making model when they assess loan applications. This enables a broader audience to access credit, at more competitive rates, which they may have been denied using traditional loan criteria.

The FCA-regulated lender was founded in 2020 by Robert Pasco and James Pursail, following Rob’s own challenging experience in trying to secure credit in the UK. As a New Zealander, who had immigrated to work in finance, he found his lack of credit history a major obstacle in finding a loan, leading him to rely on high-interest credit cards to fund himself, resulting in unsustainable high-cost debt.

Inclusive borrowing

Plend’s goal is to use open banking data to offer affordable lending to people who have invisible or inaccurate credit histories – young, new to the country, and more financially vulnerable consumers – offering them a fair decision, affordable repayment rates, and a more compassionate way to borrow. 

Rob points out that many traditional loan assessments are still based in part on outdated criteria such as postcode or regional data. If applicants have a thin credit file, the use of such data can significantly skew the outcome of loan applications. He adds that there is no correlation between where people live and their likelihood to repay. 

According to research from PWC, up to 20 million UK adults are held back by inaccurate credit data, while Plend’s own 2023 Financial Inclusion report revealed that 33% of people have found it more difficult to access loans or credit cards since the start of the cost of living crisis, while 28% of people feel locked out of the financial system altogether. 

Plend’s alternative approach to borrowing has enabled it to lend £7.3m over the past 12 months – saving an average of £600+ per customer. Many of these individuals could have otherwise been denied funding, or turned to costly overdrafts, illegal money lending, or credit cards. 

Plend uses payments provider GoCardless’s portal to collect customer payments. Once approved for a loan, they’re directed to a Plend-branded GoCardless portal to set up a Direct Debit bank payment mandate. In addition, Plend will soon use GoCardless for variable recurring payments (VRPs), powered by open banking, to give customers another repayment option. The flexible and immediate nature of VRPs will enable customers to easily change their payment schedule to suit their financial situation.

How customers view open banking

This summer, Plend contacted its very first five customers to ask them about their experience of using open banking data as part of the loan assessment and the difference it made to their finances. We share their views below.

Accurate decision-making 

“What stood out to me was Plend’s unique approach which takes into account your banking information to determine how much you can afford to pay each month. I don’t feel credit scores show a true reflection of a person’s financial ability – open banking is a more personal way of seeing how someone can deal with their finances.”

Customer 1

Consolidating debt

“I wanted to take out a loan so that I could consolidate my debts into manageable monthly payments. Plend’s open banking system, compared to the credit score system, gave me a fair chance to be accepted. It made me feel more confident that I was being evaluated fairly. Being able to have that lifeline has helped a tremendous amount, allowing me some breathing space from overwhelming debts. It feels like a weight has been lifted off my shoulders!” Customer 2

Assessing ability to repay

“Plend looks beyond that ‘one size fits all’ thinking of your credit score and your postcode. I was given a much fairer interest rate for my personal circumstances. Other lenders just look at credit scores, whereas Plend looks at your banking data too, which allows them to see your incomings and outgoings. The open banking approach definitely made me feel more confident that my application was being reviewed fairly. It only takes minutes to set up, and it’s not a long drawn out process.

Before Plend my only options were higher interest rates, being in a vicious circle and never getting out of debt.” Customer 3

Less paperwork and faster decisions

“Open banking saves you from filling out lots of forms about your spending and you just let people look at your bank account to see the real numbers. Sometimes the forms are inaccurate, and you can’t remember spending information. I think open banking is the way to go, I know credit scores will always be here, but with open banking, it gives access to your recent banking data in order to understand exactly what you can afford to pay each month. It’s a great way to demonstrate if you can actually afford the loan. If you’re looking to consolidate debt, then it’s easy to see which amounts you’ll be able to pay off.”

“[Having to connect my bank account] didn’t make me feel nervous at all – after all, it’s my bank account and I have nothing to hide. I suppose there are always security issues but because Plend explained they were regulated by the FCA I felt it was safe.” 

Customer 4

Community finance

As well as lending directly to personal customers, Plend works with several community development finance institutions (CDFIs). These include social enterprise Lendology, which offers lending to local authority homeowners; Purple Shoots, which offers microfinance for small businesses and social enterprises; and Robert Own Community Banking, a not-for-profit organisation that provides loans for businesses, homes and community initiatives in Wales.

By providing its open banking technology to these CDFIs, they can extend loans to a broader range of individuals, many of whom would be locked out of affordable credit.

Conclusion

Utilising open banking data in the loan approval process is helping to tackle financial exclusion and offer fairer, more socially responsible borrowing to a range of under-served audiences across the UK. It’s also proving to be an effective way to prevent fraud and to flag up customers in pre-arrears, helping to stop them from falling behind with their debt repayments. 

Rob concludes: “Open banking isn’t just about expanding access to credit, it also provides a powerful tool in fortifying your financial security. Plend leverages open banking to provide our users with fraud prevention and anti-money laundering protocols. Our customer’s safety and trust are our top priorities, and with open banking, we ensure a level of protection that sets us apart.”

Notes to editors

Open Banking Limited does not endorse any of the products or companies mentioned here.

If you would like to share your organisation’s experience of open banking, please email us at press@openbanking.org.uk. 

If you would like to talk to one of our team about how open banking could help your business, please email us at enquiries@openbanking.org.uk.