Managing your portfolio in January with categorised open banking data

DirectID’s Chief Commercial Officer, Clare McCaffery, explores how portfolio managers can use categorised bank transactions to better identify and prevent emerging financial distress in consumers.
Published on
January 4, 2023
Author
Clare McCaffery
Category
Finance & Fintech

There’s no tougher time than January for consumer financial management.

YouGov reported on findings that showed nearly 4 in 10 (38%) anticipated borrowing to cover Christmas expenditure - 22% of Britons expected their debt streams to increase over the holiday period. This year will be particularly testing as the impact of inflationary pressures, rising cost of living and escalating interest rates continue to spike. Consumers living on fixed income, low income with limited savings and those with income rising at a lower rate than inflation could find themselves vulnerable.

Credit bureau data

Credit bureau information has traditionally been used to assess credit worthiness, particularly at the point of application. This data gives a snapshot of a consumer’s financial position but offers a backward-looking view. The usefulness of this data for predicting future financial health and emerging financial distress is limited.

In addition, companies offering buy now pay later facilities do not report to the credit bureaus which leaves the true extent of consumer debt undetected, particularly at a time of year when these facilities have been utilised in the run up to the festive period.

Categorised bank statement transactions

Bank transactions from a consumer bank account give a much clearer picture of consumer spending behaviors. Decision makers can see whether a consumer is becoming over leveraged and the impact of additional economic pressures on their financial health in the future.

DirectID provides a view of bank transactions to help decision makers detect early signs of consumer distress. Categorised transactional data provides a clear view into a consumer’s ability to service debt and afford new borrowings.

By monitoring income and identifying debt-related outgoings, decision makers can use the DirectID platform to understand the current and future financial health of a consumer, making it easy to identify any early signs of distress.

The example below, taken from DirectID’s financial health report, demonstrates a negative trend a portfolio manager could typically view on a consumer. Whilst income appears to remain constant, income from a stable source, such as employment, has dropped whilst debt servicing obligations have increased. The information is available within seconds of a consumer connecting their account.

Open banking data is the answer

Only with open banking can these trends be identified. Open banking data is enabling portfolio managers to take early action and reduce the risk of bad debt, ensuring  that consumer repayment obligations are structured in an affordable manner.

For more information, or to view the data yourself, get in touch by filling out the form at the bottom of the page.

Get detailed insights into your customer's financial behaviours

Discover how DirectID’s open banking platform can help grow your business and protect against risk at every stage of the credit risk lifecycle in the ‘DirectID Platform’ PDF.
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What our customers say

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DirectID began working with Target at the beginning of 2020 to provide open banking data for their new Mortgage Hub. It is the first digital mortgage platform to be designed from the ground up, and the first to use open banking data as the backbone for customer experience.

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Get started using open banking data

Talk with one of our specialists to find out more about using open banking data.

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Frequently asked questions

Schedule a call
01

What is open banking and how does it work?

Open banking is the practice that allows people and businesses to share up to 12 months of transaction data. DirectID is regulated by the Financial Conduct Authority as an Account Information Service Provider (AISP) - the intermediary who safely facilitate this process.

02

What is transaction categorisation?

Transaction categorisation is the process of adding context to raw transaction data. The process gives you an understanding of what your customers' spend their money  and where.

03

How does bank account verification work?

Using the bank account verification API, DirectID matches the details provided from your customer to those on their account. We apply a set of sophisticated algorithms and rules to verify the name, and then tell you what does and does not match.

04

How do you verify income with open banking?

After a customer shares their data, DirectID identify recurring credits to the account and group these. Using an algorithm we identify the monthly income for each income stream. We then return the calculated income and confidence score to you.

Speak with one of our specialists