APPG hears of ALD success
11 Feb 16
The All-Party Parliamentary Group (APPG) on Credit Unions has heard of the successes of Automated Lending Decisions (ALD).
Politicians, credit unions and supportive organisations in attendance heard how ALD has helped the credit unions using it to reduce their bad debt by a combined £1 million, while those credit unions simultaneously saw their loan books grow at twice the sector average.
The ALD system was developed by ABCUL with funding from the Santander Foundation, and it was initially rolled out by ABCUL’s subsidiary Cornerstone Mutual Services to 68 credit unions in the UK Government’s Credit Union Expansion Project. The reduction in bad debt alone to date represents a 3% return on the Government’s total investment in CUEP – even before the main operating model has rolled out.
Minister of State for Welfare Reform Rt Hon Lord Freud addressed the meeting to welcome the business benefits of ALD to credit unions and the commitment of the Santander Foundation and Experian in helping to develop it.
Cornerstone’s Adrian Davies then outlined those key benefits, which include greater efficiency and reducing the cost of small sum lending to cover its costs, significant reduction in bad debt thanks to better credit data, and substantial growth in lending as credit unions’ confidence in their lending decisions grows.
The meeting then heard from credit unions that have pioneered this technology. Mike Barry from Blackpool, Fylde and Wyre Credit Union explained how the automated system won over sceptical loan officers with the robustness of its decisions, and how this has meant greatly increased processing capacity and growth in lending, resulting in the credit union’s financial sustainability.
Jackie Hallewell and Simon Martin from Sheffield Credit Union then showed how ALD had helped them slash their bad debt, achieve sustainable small sum lending, and make larger loans with greater confidence – doubling the number of loans they make over £1,000 and trebling the number of loans over £2,000.
Finally, James Jones from Experian spoke of their commitment to financial inclusion and ongoing initiatives to build credit referencing tools using real time data, and the inclusion of utility bills data and social landlords’ rent data in their system in order to broaden the ways in which consumers on lower incomes might build a credit history.
ABCUL Chief Executive Mark Lyonette said: “ALD has made a real positive difference, and it was great to hear first hand testimony from credit unions of how this has helped them cut costs and lend sustainably with greater confidence.
“It was also a good opportunity to emphasise that ALD does not take a restrictive ‘computer says no’ approach to lending decisions, but on the contrary can be tailored to individual credit unions’ risk appetites, harnessing the positives of new technology to help people build a credit profile and give credit unions the confidence to make more loans to consumers with limited financial choices.
“ALD has only been a success because 68 credit unions worked together with Cornerstone and the Project team to develop the tool and ensure it delivered. This is another fine example of how credit unions achieve much more when we co-operate and pool our resources and skills to move the sector forward.”
Following its successful development and deployment with the credit unions in the Expansion Project, ALD will shortly be available for all credit unions to buy into through Cornerstone Mutual Services.