Banks ask how Brexit will affect customers by David Grier (Chief Technology Officer)

Martin Lewis is stumped. His recent post for moneysavingexpert.com on 25 need-to-knows about Brexit saw him a little at sea. On the question of what’s going to happen with mortgage, loans and savings rates, he is holding up his hands. He says, with admirable honesty:

“Mortgage, loans and savings rates could, er, rise or fall. This is a really tricky one.”

Indeed it is. And there’s a general sense that consumers are having to work things out for themselves, reading Brexit commentators and pundits like never before, whilst keeping a careful eye on their expenditure.

However, for the UK’s banks, it’s a different matter. They can’t just suck it and see. They need to able to look at the potential risks in the market of a variety of Brexit scenarios and model how these scenarios would play out across their customer base. It is imperative for them to have a handle on exactly how a rise or fall in mortgage, loans and savings rates might play out – right across their customer base – from the most secure customer to the most fragile.

Financial IQ

Never before has Castlight’s Financial IQ tool, or FIQ Insights, been more invaluable.

FIQ Insights is one of a suite of tools developed by Castlight Financial using Open Banking technology and our categorisation engine CaaS, currently the most powerful of its kind in the UK. Built into the software is not only the functionality for categorisation of income and expenditure but also a capability to track financial behaviours and predict vulnerabilities.

If we add into this the economic forecasting data from our colleagues at Experian – the UK’s leading economic forecasting group – then you have a strong set of data for which to understand you and your customer’s exposure to an economic downturn.
FIQ Insights broadly positions every customer across a bank’s portfolio in one of 5 categories, based on an analysis of their committed, discretionary and essential spending:

1. Secure
2. Comfortable
3. Ticking Over
4. Stretched
5. Distressed

Then, with customers across the portfolio allocated an FIQ spending category, a bank or other lending organisation can model for a range of scenarios . For instance, what if a no-deal Brexit caused a 2% spike in inflation or a 1% rise in interest rates? How would this affect the “stretched” customers? Would it tip them into the “distressed” category? Could it even tip some “ticking over” customers into the “distressed” category. And if so, how many?

Of course, FIQ Insights can do so much more, drilling down into the granular data in portfolios, IQ categories and accounts.

However, for now, with the Brexit deadline looming, it’s the Brexit features that are exciting credit risk experts. I can almost smell the smoke as they fire figures, data, models and Brexit scenarios into FIQ Insights to see how best to protect their customers for both the foreseen and unforeseen.

Not so tricky really Martin Lewis – if you have the right technology!

Use the Castlight brain to stay ahead of the game

The brain makes around 700 new connections each day – every time we do something for the first time or absorb new information, brand new neural pathways are formed. And the more connections we make and continue to use, the more effectively our brain works for us.

At Castlight Financial our data scientists and our customers are making connections between our products all the time. Our developers are making leaps between products, developing syntheses of ideas to create new services to meet the ever changing needs of the financial marketplace. And our clients too, are making connections, moving through one product to another, merging products, asking us to develop new products, bolting on aspects of one product to another.

And as our customers work with our developers and implementation teams, every day we see new connections being made between our customers’ pursuit of excellence and the solutions we can offer. New neural pathways are being formed, our customers’ businesses are being strengthened.

So that’s why I like to use the analogy of Castlight’s product portfolio as a brain – with neural pathways all leading off to different products – but with myriads of connections between them.

Castlight Financial portfolio of digital tools

Digital tools are too often put in a “toolkit” which is a perfectly good analogy for the way digital tools are used in many companies. But for us, I think the toolbox is too static. Once you’ve used a tool you put it back in the box and take another one out. We don’t want our customers to use our tools like that. We believe our customers will benefit if they sometimes use more than one tool at a time, if they adapt the tool as they go along, combine two tools together or get someone to run after them with a new tool that was never even in the box. And we also believe that our tools will make such a difference to our customers’ business that they will never want to put them back in the toolkit.

That’s why using the analogy of a brain to think about Castlight Financial’s portfolio of digital tools works so much better for us.

If we stay with the picture of the brain, our tools are located in different nerve centres of the brain. Some are more right brained products – intuitive, thoughtful and subjective. Products for instance like our Financial IQ, which uses customers’ transactional data to provide advanced insights into spending behaviour and reports its findings as a “persona” with a Financial IQ score and a set of uniquely individual predictive behaviours. It’s a product that understands how people think and behave. Other products are perhaps more left brained – more logical, analytical and objective such as CaaS or Categorisation as a Service. CaaS is the world’s most powerful engine for categorising and interpreting customers’ transactional data, which will, within minutes, take a customer’s raw transactional data, crunch through the numbers and split the raw data into over 180 categories of discretionary and non-discretionary spending. It’s a product where the numbers tell the story.

How it works with our customers

But of course, the right brain works together with the left brain, with neurons jumping synapses, making connections all the time. And this is how it works with our customers too.

A High Street bank, for instance, may be using CastScore to reach out to customers with thin credit files, who are normally excluded from credit, and give them a chance to be fairly assessed. Then together we identify an opportunity to take a slightly different path and use CastScore to help their customers augment a traditional credit score and radically improve it. And then our hypothetical bank may recognise that they can take Castlight’s risk management customer analytics up a gear and go down the path of implementing Castlight’s Financial IQ or test their data in Castlight’s Data Labs using our APIs to review the affordability performance of their portfolio, highlight problem areas and unlock potential for growth.

Constant changes

It’s one of our most important functions as a team to help our customers identify which pathway to go down to secure the best tools to empower them to grow, and to be robust and effective for their customers.

The open banking revolution is taking hold and taking hold fast. And banks and other financial organisations need to be more nimble and innovative than ever before. We must give our customers every opportunity to move agilely in and around our product suite, using the tools that best suit their needs today and exploring those that might suit their needs tomorrow. And back in the Castlight lab we must continue to test the products we believe our customers will need next month.

In the same way that the human brain constantly changes in response to experience, helping us learn and adapt to our environment, Castlight’s products are designed to help our customers adapt to an evolving financial landscape and predict what might be around the corner.

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