• Data from ClearScore shows challengers and fintechs stealing share of lending market during Covid-19 pandemic
• ClearScore data suggests there are 9.3m credit customers ready to use open finance for their lending needs, 3.2m of whom are currently poorly served by the market
• Early adopters of open finance data-sharing are lower risk says ClearScore

During the pandemic, challenger banks and fintechs tripled their share of the credit card market and grew their personal loan books by 50% – according to new data from ClearScore, the UK’s leading free credit score and credit marketplace. 

Andy Sleigh, ClearScore COO, commented: “The pandemic allowed newer entrants and more nimble, smaller operators to focus on growth at a time when the high street banks had to – understandably – protect and serve their current customer base. And we don’t see this trend abating. In fact our own analysis points to increased consumer adoption of open finance which in turn could help challengers to take further market share from the high street banks.”

ClearScore’s data reveals that there are some 9.3 million adults in the UK that would consider using open finance to get better access to credit, improved offers and interest rates. Of these, 3.2m are currently underserved by the market - that is, they lack credit options or are unsatisfied with the credit options available to them. 3.6 million currently have no credit products at all.

This combination of the underserved and those without any credit products shows that the lending market is set for considerable growth and that those using open finance will be able to reach a wider array of customers than ever before. 

“The lending market has been changed forever by the pandemic” Sleigh said. “Fintechs and challengers have embraced open finance more readily than their larger competitors, as it allows them to expand their lending footprint, manage risk better and reduce their overheads. The fact is that open finance allows lenders to offer more competitive, personalised rates to consumers thanks to a far deeper understanding of their finances and risk profile.”

“Traditionally, customers would first turn to their existing financial partner – i.e. their bank – if they were in the market for a credit product. But with the influx of challengers and fintechs, who, thanks to open finance and more agile technology, are able to offer not only highly competitive rates, but also pre-approved products with a guaranteed rate and credit line. This all means that the traditional route to market is becoming less and less popular.”            

ClearScore’s data also suggests that consumers who choose to share their data are typically lower risk than others within the same credit score bands. This means that lenders can afford to test the use of open finance data with little risk to their product economics.

Sleigh concluded: “The size of the open finance market is huge and presents lenders with the opportunity to create innovative products that benefit the customer. Those customers are engaged, aware of the benefits and ready to shop around. The lending market is still 30% down compared to pre-Covid, but we see open finance as the key to unlock it and offer consumers better options than before. When it does, we expect the floodgates to open and the race to support those customers is one we’re excited to see.”