Oakam accelerates financial UK inclusion with alternative data

Digital micro-lender, Oakam has provided over 420,000 loans totalling over £320m to consumers overlooked by mainstream financial institutions since 2006.

Alternative data is enabling Oakam to employ new methods in underwriting and risk management to expand credit access for financially excluded consumers in the UK, while maintaining robust lending standards.

Frederic Nze, founder and CEO of Oakam, said: “The democratisation of smartphone technology and internet access is unlocking innovation that will bring the world’s 2.5bn financially-excluded adults into the financial system.

“Our digital customer journey gives us access to new insights and data sources that are accelerating inclusion and challenging traditional definitions of creditworthiness.”

Data from FICO shows that 60 to 75 per cent of traditionally unscorable consumers could be assigned a more meaningful credit score using alternative data. For Oakam, supplementing traditional methods of underwriting, such as the analysis of credit bureau data with alternative approaches has enabled Oakam to evaluate a high volume of applications since inception.

Oakam’s use of alternative data has also yielded positive repayment behaviour among customers. It is said that 70 per cent of new customers made on-time repayments, despite previous challenges accessing credit due to their income levels. This is according to a study of 15,000 first-time Oakam customers between January 2015 and July 2016.

In its constant drive for innovation in alternative underwriting, Oakam is partnering with City, University of London for a joint R&D project to further the usage of psychometric data and behavioural science in its risk decisioning.

This partnership will allow Oakam to bring new scale to its business and lower the cost of borrowing by applying human expertise to a digital context.

Dr Lara Zibarras, senior lecturer in organisational psychology at City University and head of initiative at Oakam, also commented: “City University is constantly looking for ways to innovate and partner with market leading companies making the partnership with Oakam a great fit.

“Pushing the boundaries of alternative underwriting will begin to open doors for greater financial inclusion and help those who need it most. The full potential of alternative data in cracking the challenge of global financial inclusion is far from being reached.

“The benefits of digital approaches to micro-lending are just beginning to show. As more financial services providers embrace innovation, financial access and equality will accelerate across the developing and developed worlds.”