I wrote recently about the sea change in perspective in the lending landscape. The FCA is urging lenders to be more forward looking, to anticipate how borrowers will be able to repay their debt further down the line. Will they be able to weather a storm or will they go under?
This is great news because it is core to our fundamental mission at Castlight to do what we can to create a “safer financial world”. We have our Affordability Passport tool, designed to ensure that no-one sets out on a financial journey without partnering with their lender to ensure that both parties are confident they are fit to travel.
Using open banking technology, the Affordability Passport allows a borrower to share their transactional data in real time with a lender, categorising their discretionary and non-discretionary spending into over 150 categories and then merging the transactional data with credit performance data to reveal their ability to afford a loan.
The Affordability Passport provides a picture of financial health in the here and now and I’ve written before about how it can, crucially, be predictive of behaviour and facilitate this important position of looking forward. It can reveal detailed patterns of spending and allow a lender to make judgements on how these spending behaviours, if continued, will impact on their ability to repay their loan.
But what I’ve not drawn attention to before is the way in which the Affordability Passport technology is also retrospective. And how this powers its ability to be “redemptive”. Because the Affordability Passport can track back through transactional data over many months and years, it allows an individual to demonstrate changed behaviour. A prospective borrower may for example have defaulted on their rent for two consecutive months in the previous year, but the Affordability Passport process will show that they have caught up and paid faithfully and fully ever since. Maybe they now have a secure job or they have had a debt repaid to them. They are in a different place. They have moved on from the mistakes of the past. They should be forgiven.
The Affordability Passport technology, empowers a lender, if he or she chooses, to recognise mistakes have been made in the past but that the borrower has learned from them. It gives the lender the confidence to offer the borrower the opportunity to move on with their lives.
Castlight Believes In Redemption
I believe firmly in the power of redemptive technology – robust number crunching technology, powered by sophisticated AI – that gives people another chance.
And there are precedents in the business world for redemptive practices, powering change and progress. Professor Manfred Kets de Vries is a Dutch psychologist and recognised guru of organisational change. And I love his take on forgiveness:
“Forgiving means not being a prisoner of the past. Truly transformational leaders like Mandela, Mahatma Gandhi and Aung San Suu Kyi seem to have figured this out. When we forgive we don’t change the past but we can change the future.”
As part of the global financial community, we know we can change the future and sometimes we can do this through technology that allows people to learn from their mistakes and go forward. I’m glad that the opportunity to demonstrate changed behaviour is embedded in our Affordability Passport. I’m glad we are able, as an organisation, to play a part in helping people get their lives back on track.
We talk a lot about disruptive technology in the fintech world – we are always working to use technology to change the way people think about things and run their lives.
What could be more disruptive than redemptive technology?