Why data is the key to financial inclusion
Rhona Parry, vice president, external affairs, EU at Equifax, explains why more government data will help the most vulnerable in society
In the US, there’s a dating website that matches you with potential partners based on your credit score. Passion killer for some. Crucial insight for others.
Thankfully we don’t have such an empirical approach to finding love on this side of the pond. But the UK does lead the world in harnessing data to help people in other ways.
We boast some of the most innovative companies in the world. The UK is ahead of the curve in thinking about responsible use of data, as evidenced by the creation of the Centre for Data Ethics and Innovation. The most fundamental building block for our continued success on this global stage is access to data.
Government is one of the biggest data businesses in the UK. Government-held data has tremendous potential to be used for the public good, particularly to tackle financial exclusion. The Financial Conduct Authority estimates 50% of adults show signs of potential vulnerability. In the last two years, 4.5 million adults were declined a financial product. In some cases that’s the right decision, but often it’s because of a lack of available data about the person applying.
Some of the most financially excluded people in the UK live in social housing. This means they’re often forced to use high-cost credit at an annual percentage rate of more than 1000%. In turn this can lead to spiraling debt, impaired social mobility, and higher costs of living.
For most people, their biggest monthly outgoing is usually rent, yet this payment data isn’t currently widely captured. If we could record rental payment data from local authorities, the vast majority of tenants would benefit from lower interest rates and access to a greater range of products. Equifax has identified that for individuals paying social and affordable rent, more than two thirds of people with limited credit history would see an improvement in their credit scores if rental payment data is taken into account.
The government has a strong track record in opening up data for defined public interest purposes, from the electoral roll to VAT registration data. Likewise, our regulators are world-leading in helping businesses and consumers to innovate with data, from open banking to regulatory sandboxes. We also have a proven culture of collaboration between the private and public sector to maximise the value of data. The sharing of rental payment data should be the next step for the Government to take, and can set a path for the world to follow.
Combining big data with artificial intelligence (AI) also offers widespread benefits for addressing society’s most pressing challenges. Equifax’s patent-pending NeuroDecision Technology® is already being used around the world to help improve financial inclusion. In a recent project in Latin America, where vast numbers of the population are unbanked and struggle to access financial services as a result, the accuracy of Equifax’s models almost doubled when we combined AI and big data. For the millions of people that are financially excluded, that is game-changing.
Of course there can be risks in sharing data. To overcome those, businesses and governments must earn and keep people’s trust that their data is treated safely and ethically and is used to empower them as citizens and consumers. The government should lead by example, making data open wherever possible. Not for its own sake, but because the perils of inaction are greatest for the most vulnerable in society.
Equifax is a global data, analytics and technology company that brings insights to consumers, policy-makers and businesses.
Article originally published in the New Statesman on 2 November 2018.