Providing Research Support for the Affordable Credit Challenge

STBY worked with Nesta and HM Treasury to scope the problem statements and orchestrate matchmaking among  fintechs and responsible finance providers for the Affordable Credit Challenge which launched late 2019.

Access to affordable credit is a major issue across the UK

Across the UK, 8 million people rely on high cost credit to pay essential household bills. With limited savings and poor or non-existent credit scores, a large chunk of society is excluded from access to affordable credit. Their only option is often to turn to payday or doorstep lenders, who provide short term, but extremely high cost credit. The exorbitant costs are difficult to manage for many, resulting in detrimental economic and personal outcomes.

The responsible lending industry is ripe for innovation

That’s why Her Majesty’s Treasury, responsible for developing and executing the UK government’s public finance policy and economic policy, recently partnered with Nesta, an innovation foundation, on the Affordable Credit Challenge to bring fintechs and responsible finance providers together to offer a better alternative. There are many responsible finance providers already out there, lending to consumers, small businesses and social enterprises that cannot access finance elsewhere. As community based institutions, with little to no profit, finding the time and resources to innovate technologically is difficult. And while a few are adopting and working to develop cutting edge fintech, others lag behind. 

Industry innovation requires trusted partnerships between service providers and fintechs 

What are the barriers to working with and adopting fintech? Where is there the most potential for responsible finance providers to innovate technologically and which fintech partners are most suitable to help them? How do responsible lenders find out which fintech is right for them? Once aware of a promising fintech, how does a Credit Union develop and foster a longer term strategic relationship? These were some of the questions posed to STBY prior to the launch of the Challenge.

Through desk research, expert interviews and various workshops with both responsible lenders and fintech representatives, we worked alongside Nesta to scope the challenge, connect relevant partners to apply to the Challenge Prize together and design a platform and process that enabled matchmaking at scale. Through this process we were able to gain new insight into the pain points throughout the affordable lending journey, and where fintechs were able and keen to provide support. These insights took the shape of six problem-opportunity statements to help inspire and  facilitate conversations between community lenders and fintechs around the most impactful opportunities  after the launch of the challenge. 

Nesta awarded development grants of between £125,000 and £150,000 to six community lender and fintech partnerships. From these, three winning partnerships were selected in Spring 2020 and each of these  received a cash prizes of £200,000.

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