Case studies

Salad Money uses open banking to deliver fairer finance

10 January 2024

Salad Money is a social enterprise and community development finance institution (CDFI) that has helped to pioneer the use of open banking data to build a fairer, more inclusive credit market. The FCA-regulated lender started out by offering personal loans to NHS and public sector employees, but has recently extended its offering to anyone in employment. Many of its clients would otherwise be excluded from the traditional lending market.  

Established in 2018 by CEO Tim Rooney, Salad Money’s tagline is ‘More than your score’. This organisation primarily lends to those individuals who lack the strong credit scores that many lending institutions rely on to assess people’s ability to repay loans. Its 2022-2023 Impact Report highlights that about 6 million people in the UK are ‘credit-invisible’ and are often automatically rejected for a loan by many lenders because of this. 

As well as being denied access to finance, these individuals are often faced with no alternative but to use high-cost – and sometimes toxic borrowing – that can over-burden individuals with loans that they can’t afford to repay, and create a vicious circle of debt.  

Salad Money’s inclusive approach has succeeded. Since May 2019, the CDFI has lent £56 million to 44,000 customers, solely using open banking data, with very low loss rates.  

Its customers say the same. Salad Money recently celebrated its 5,000th TrustPilot review, and is proud to have an average score of 4.9 on the independent review channel.  

Who is the audience?  
Salad Money offers loans of between £500 and £1,000 to UK employees, repayable over a 12- or 18-month period. Borrowers need to demonstrate that they have a minimum of six months’ worth of past income of at least £1,400 per month from the same employer.  

How does it work? 
Borrowers applying to Salad Money allow the organisation to use open banking to access their bank data – the equivalent of uploading a bank statement. This enables the firm to assess all of an individual’s spending: money coming in, money going out, regular Direct Debits (including ‘non-reported items’ such as council tax which are ignored in traditional credit assessments), and any missed payments. This accurately demonstrates the difference between their fixed expenditure and their disposable income, and their ability to repay a loan. 

In the five years since it has been operating, the CDFI has built up thousands of data points about financial behaviour, painting an accurate picture of each potential borrower’s spending habits. This data has now been adopted by mainstream lenders, credit unions and other CDFIs to support their lending processes and decision-making.  

Rooney says: “We are able to consume that data very efficiently. Through our partnership with [open banking platform] Yapily, we have a categorisation process that we use, and we make good lending decisions. Regardless of whether you’ve got a CCJ, or you’ve missed a few payments, we’re looking for the good and we find the good.” 

He adds that, in some circumstances, Salad Money believes CCJs can be a positive: “For example, an applicant with a five-year-old CCJ which has been settled may be rejected by some lenders. But for us, that satisfied CCJ, or in fact a CCJ of two to six years old, often paints a useful part of the picture of financial reliability and responsibility. 

“We even produce packs for some banks on their customers: what their borrowing is, who they’re borrowing from, and the annual percentage rates [they are charged by] the organisations that they’re borrowing from.” 

The loan assessment itself is supported by human decision-making from Salad Money’s customer service team, and applicants often receive a response within minutes. Once a loan is agreed, funds can appear in borrowers’ accounts within hours of being authorised. 

One client, an NHS staff nurse, recounted her experience after conducting an online search for lenders which work with people who have a limited credit history: “I found Salad and it seemed to make sense – if they could look at my income and outgoings through open banking, they should be able to see I could afford to borrow what I needed. It was a pretty easy process and the very next day I was told I’d been approved.” 

Her £1,000 Salad loan helped her pay for her wedding. She adds that the repayments were “easy to manage, and I realised I could actually pay it off earlier than I had originally thought, so I have done, which saved me a bit of money too”. 

Salad Money also offers follow-up lending if needed, with clients going through another open banking affordability check after, say nine repayments, and applying for another loan. Loans are repaid via their employer’s payroll or by Direct Debit. 

It also uses open banking data to remind customers that their loan repayments are due. Rooney says: “If we can help a customer before they hit a brick wall, then open banking is a very useful way of doing that.” 

Benefits checker 
Another key tenet of Salad Money’s approach to fair lending is the inclusion of the InBest benefits checker as part of its application process. The checker compares the benefits that people receive with any benefits they are entitled to, based on their specific financial situation, enabling applicants to see if they are eligible for any, or further, benefits, and signpost them to the Government Gateway to apply. 

One customer found his household was entitled to an extra £200 per month that he didn’t know existed when he applied for a £1,000 loan, and in some cases, the additional benefits can eliminate the need for a loan altogether. 

Rooney explains: “One thing that we’ve been incredibly successful at, which, again, wouldn’t have been possible without open banking, is helping people claim additional benefits. This year we’ve identified around £36 million worth of additional benefits which people are entitled to each month (an average of £4,176 per year). In a lot of cases, for a declined customer, this is the difference between them needing to borrow or not.”  

With the gap in the availability of affordable credit expected to reach £3bn by 2025, and many UK households continuing to face cost of living increases, it’s clear that socially inclusive lenders such as Salad Money – through open banking – have an increasing role to play in unlocking affordable lending and supporting financial inclusion.

Notes to editors

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

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