Fraud: A growing threat to the credit industry, customers and communities

Published 21 May 2025

Fraud is more widespread than ever, causing significant harm to businesses, individuals, and communities. It erodes trust in the digital economy, hampers economic growth, and destabilises vulnerable economies worldwide. As criminals adapt and evolve, the impact extends far beyond financial losses, threatening the integrity of financial systems and consumer confidence.

Ensuring our voices are heard: Jason Wassell on credit information reform

Published 21 May 2025

Over the past year, I’ve represented the Consumer Credit Trade Association on the Industry Working Group (IWG) tasked with developing proposals for a new Credit Reporting Governance Body (CRGB). It is an important and potentially far-reaching piece of work that could change the way credit data is overseen in the UK—and it’s vital that smaller and specialist lenders are not just consulted but properly considered in how the new regime is shaped.

Regulatory News:
21 May 2025

Published 21 May 2025

This week, HM Treasury set out the government’s proposal to reform the Consumer Credit Act. They also published its consultation response regarding the regulation of Buy-now Pay-later. The FCA published it Financial Lives 2024 Survey and also reflected on its recent Open Finance Sprint.

Trapped in a cycle of misery: The reality of loan shark debt

Published 20 May 2025

Loan shark debt can devastate individuals and families, affecting vulnerable members of society and leading to life-altering consequences. Behind the scenes, the England Illegal Money Lending Team (IMLT) continues to fight this criminality, ensuring illegal lenders face justice and providing essential support to victims. Research from the IMLT highlights the alarming statistics surrounding loan shark debt. The findings underscore the challenges faced by borrowers and the urgent need for support and intervention.

Regulatory News:
14 May 2025

Published 14 May 2025

This week, the FCA published their quarterly whistleblowing data for 2025 Q1 as well as data on the appointed representatives population and financial services activity. The regulator also announced that David Geale has been appointed Executive Director for Payments and Digital Finance.

The FCA’s new five-year strategy and what it might mean for alternative credit

Published 01 May 2025

Earlier in the spring, the FCA launched its new five-year strategy that will run until 2030. The aim is to deepen trust, rebalance risk, support growth and improve lives. The regulator has outlined four main themes for its future areas of work as part of the strategy which can be seen below: Be a smarter regulator – predictable, purposeful and proportionate. The FCA will improve its processes and embrace technology to become more efficient and effective. Support sustained economic growth – by enabling investment, innovation and ensuring the continued competitiveness of the UK’s world-leading financial services. Help consumers – to navigate their financial lives by working with the wider industry to boost trust, product innovation and ensure the right information and support is available for people to take informed financial decisions. Fight financial crime – by focusing on those who seek to do harm. The strategy will go further to disrupt criminals and support firms to be an effective line of defence. We have reviewed the strategy and welcome much of the shift in tone. There is the promise of a move away from over-cautious regulation towards a more proportionate, risk-balanced approach. The FCA acknowledges that regulatory standards – while essential – can also unintentionally stifle innovation and create barriers for new entrants. The new strategy promises a more flexible process and smarter use of data. Despite this rhetoric of risk rebalancing and smarter regulation, just now the burden of compliance remains heavy – especially for smaller firms. This is an area where we would like to see change. Elsewhere, the strategy makes clear that the Consumer Duty isn’t going anywhere. If anything, it will become more deeply embedded in how the FCA assesses conduct. Alternative lenders will need to continue evidencing that their products offer fair value, that communications support consumer understanding, and that they’re identifying and supporting vulnerable customers appropriately. Of course we have questions that we will pick up with the FCA in future meetings. Some of this may be a cultural challenge for the FCA. For example, many decisions and interpretations rest with various FCA teams, especially in the world of principles and outcomes. How do you ensure that this change reaches the frontline discussions between firms and the FCA? How will the FCA incorporate access to financial services as a measurable outcome of the strategy, particularly for underserved markets? We must not lose focus of the need to improve access to credit. What metrics will the FCA use to assess whether competition and investment have improved across different segments of financial services? We can focus on the big numbers, but we know that small markets help underserved groups. How do we track success or failure in these different segments? At the CCTA, we will continue to be a strong voice for smaller lenders – advocating for proportionate, practical regulation that allows responsible firms to thrive and serve consumers well. We will all need to work together to ensure the regulator delivers on the aims of its new strategy.  

Navigating IVA portfolio management
Challenges and opportunities for lenders

Published 27 April 2025

In today’s consumer finance landscape, lenders are grappling with increased regulatory demands, the need for fair consumer outcomes, and the pressure to maximise returns on Individual Voluntary Arrangements (IVAs). While IVAs offer a structured pathway for consumers to manage their debts, they also present lenders with complex challenges. Decisions on IVA proposals need to be both effective and efficient, balancing the interests of creditors and debtors, all while navigating a landscape of evolving compliance standards. The challenge for consistent decision making in IVAs For lenders, deciding on IVA proposals is not simply a matter of reviewing a few key points; each proposal may come with varying levels of detail, terms, and financial viability. This inconsistency can lead to delays or, worse, uninformed voting that might compromise the lender’s returns or fail to serve the consumer’s best interest. Lenders must ensure that every proposal is assessed consistently, allowing them to align their decisions with both internal policies and regulatory obligations. Balancing the pressure for Consumer Duty compliance with returns The FCA’s Consumer Duty requires creditors to act in the consumer’s best interest, which translates to supporting fair and manageable debt solutions. For lenders, this means going beyond the numbers in an IVA proposal to understand if the terms genuinely support a sustainable repayment for the debtor. However, in doing so, lenders face the challenge of balancing empathy with financial prudence. They need to navigate cases carefully, ensuring that decisions maximise recovery potential while promoting viable outcomes for consumers. Ensuring voting accuracy and mitigating operational risks Lenders also face operational hurdles in the voting process. Historically, IVA voting involved substantial manual oversight, with teams needing to sift through lengthy documents to interpret proposal terms and judge alignment with internal mandates. This manual process can introduce errors, especially in high-volume portfolios. Accurate voting is essential; not only does it influence the returns but also contributes to reputational risk if not handled with due care and diligence. Transparence in outcomes: A key to buiding consumer trust Transparency is a growing expectation among stakeholders, and creditors are no exception. As consumers become more informed about their financial rights, lenders must be prepared to demonstrate that their IVA decisions are fair and grounded in comprehensive assessments. Transparency benefits both parties; it reassures consumers that the process is unbiased and aligns lenders with regulatory demands, helping to safeguard against potential compliance breaches. Maintaining accurate records of each decision and establishing clear rationales for each outcome are essential steps to fulfil this responsibility. Data integration challenges in evaluating IVA proposals Lenders often struggle with fragmented data, making it difficult to review IVA proposals holistically. Without a consolidated data view, lenders face delays in interpreting key financial information, which is critical for an informed decision. Integrating consistent data, whether for understanding debtor circumstances or tracking payments, remains a pressing need. Data management challenges can impede lenders’ ability to make timely, well-rounded assessments, which could affect both returns and regulatory compliance. Supporting vulnerable customers in a high-stakes context Another challenge …

Ferrari now accepting Bitcoin
Could this change the car buying experience?

Published 27 April 2025

Ferrari recently announced the extension of its cryptocurrency payments to European dealers. They initially introduced cryptocurrency as a payment method exclusively in the United States. The positive reception to this initiative has led them to expand cryptocurrency acceptance to European markets. Given Ferrari’s prestige and influence among luxury car buyers, how will other car brands respond to this growing trend? Bitcoin: A brief history Bitcoin, created in 2008, pioneered the blockchain technology powering today’s cryptocurrency market. It experienced rapid growth, reaching parity with the US dollar in 2011 and a peak value of over $50,000. While traditional markets remain cautious, the potential for widespread adoption is significant. Ferrari X Bitcoin Ferrari, a cryptocurrency pioneer in the automotive industry, has paved the way for wider digital currency adoption. While private dealers often accept crypto, major brands remain hesitant. Ferrari’s commitment to security and partnerships with crypto experts has enabled them to offer Bitcoin as a payment option, aiming to diversify their customer base. How this could re-shape the car industry The automotive industry is hesitant to accept cryptocurrencies, but some areas of the market have become receptive to the new form of payment. Some luxury car dealers already accept Bitcoin for supercars, with BitCar set up specifically to trade cars for the new currency. The case for Bitcoin is strong, with payments able to be made to anywhere around the world, regardless of exchange rates and void of slow bank processes. Supply chains can benefit from cryptocurrency Beyond consumers, businesses can also reap the benefits. Cryptocurrency, particularly the underlying blockchain technology, offers a potential solution to the challenges faced by automotive supply chains. By using blockchain, manufacturers can track car parts, optimise supply chains, and provide customers with real-time updates on their vehicles. While privacy concerns remain, the potential advantages for the automotive industry make further exploration worthwhile. Reduce your counterfeit risk The extensive tracking and reporting capabilities of blockchain technology virtually eliminate the possibility of counterfeit vehicles. For car dealers, knowing that their inventory is secure and accounted for is crucial. Blockchain can provide this assurance. This transparency extends to car ownership as well. Dealers can easily view a vehicle’s history, including previous owners, ensuring complete transparency for both customers and stock management. How dealerships should react Dealerships must stay ahead of evolving customer expectations. The increasing role of technology in the customer experience highlights the potential of cryptocurrency as a future trend. For dealerships uncertain about the path forward, understanding the pros and cons of cryptocurrency and the steps required for implementation is crucial to preparing for potential shifts in the industry.

Key considerations
Enhancing outcomes for vulnerable customers

Published 17 April 2025

As firms continue to assess the findings from the FCA’s review of the fair treatment of customers in vulnerable circumstances, we explore a critical challenge many firms face: effectively monitoring outcomes for vulnerable customers. Many firms that we engage with believe their training, processes, and support tools are well-designed to mitigate the risk of harm to vulnerable customers. However, many struggle to substantiate and evidence this belief with measurable data and effective outcomes testing. Often, this challenge stems from a limited, one-dimensional perspective on vulnerability and a failure to embed a culture that moves beyond viewing ‘vulnerability’ as a mere compliance term. From what we have observed across the market, several key factors contribute to these shortcomings: 1. Developing a stronger understanding of your vulnerable customer A strong foundation for good outcomes begins with a comprehensive understanding of the types of vulnerabilities that are prevalent in your target market and customer base. Firms must move beyond a generic ‘vulnerable customer’ label and adopt a data-driven approach to identify cohorts of vulnerable customers and their needs, and measure for effective support strategies. Defining what good outcomes look like for those cohorts of vulnerable customers – tailored to different customer needs – is crucial for success. 2. Getting it right the first time Early customer interactions set the tone for the overall relationship. Missed opportunities in these initial stages can have lasting effects. Incorporating root cause analysis within the outcomes monitoring framework can enhance disclosure rates and drive better customer outcomes. Firms that proactively identify and address gaps early on will be better positioned to support their vulnerable customers. 3. Elevating training and education Training should empower staff to understand the deeper implications of vulnerability, exploring how personal circumstances impact customers and their needs whilst also demonstrating empathy. Building critical thinking and decision-making skills will allow teams to provide more meaningful support. 4. Encouraging flexibility and empowerment The FCA’s review highlights the importance of flexibility in solutions. Empowering staff to step outside of rigid processes and standardised support tools is key to delivering good outcomes. Customers should not be forced into predefined solutions that do not meet their unique needs. However, many colleagues fear deviating from established processes due to concerns about quality assurance failures, performance targets, or even financial incentives. Firms must create an environment where colleagues feel confident making customer-centric decisions, tailored to the specific support needs of the customer, without fear of negative consequences. An effective outcomes monitoring framework that measures against a defined suite of good customer outcomes is critical to empowering flexibility and empowerment. 5. Leveraging data for continuous improvement Effective monitoring of vulnerable customer outcomes requires curiosity and creative analysis. Firms must look beyond surface-level data, identify anomalies and investigate underlying patterns. Acting on these insights enables continuous improvement to meet customer needs effectively. Final thoughts By addressing these key factors, firms can enhance their approach to vulnerability and outcomes monitoring, ultimately improving customer experiences and meeting regulatory expectations. For further insights, explore Square 4’s publications …

Moving with the times
The future of responsible lending in a digital first world

Published 17 April 2025

As the financial services industry transitions to a digital-first world, responsible lending must evolve to meet new expectations for fairness, transparency, and customer-centricity. Digital transformation is reshaping how lenders engage with customers and manage their portfolios, enabling more effective, data-driven lending practices that enhance both the lending and collections processes, promoting better customer outcomes while upholding financial responsibility. Automating lending decisions and managing credit risk Central to this transformation is the ability to automate lending decisions and manage credit risk effectively. With the advent of cloud-based decision engines, lenders can now make quicker and more accurate lending decisions, ensuring that processes remain efficient while maintaining fairness. These decision systems can integrate various data sources, including data from open banking providers, AI, and the credit reference agencies, providing a more comprehensive view of a borrower’s financial health. This broader access to data enables lenders to make informed decisions that take a customer’s financial situation and affordability into account, which is crucial for ensuring that credit is provided only when the borrower is financially capable of repayment. By considering affordability, lenders can mitigate the risk of over-indebtedness, safeguard their portfolios and customers’ financial well-being, and reduce the likelihood of defaults and financial distress. By embracing a more holistic, customer-centric approach, lenders can better manage risk, identify vulnerable customers early, and ensure positive, sustainable long term customer outcomes. Identifying and supporting vulnerable customers Responsible lending also requires a strong focus on identifying and supporting vulnerable customers. By utilising advanced technologies, lenders can pinpoint individuals who may be experiencing financial difficulties and provide more tailored, supportive repayment plans. When lenders have access to open banking data, they can monitor transaction histories and evaluate spending patterns to detect signs of vulnerability early and more effectively. This allows them to intervene proactively and provide flexible solutions, ensuring that customers in difficulty are supported and experience the best possible outcomes. Digital-first and seamless loan origination The transition to digital-first processes also encompasses the application journey. Today’s borrowers anticipate straightforward, fully digital loan origination experiences. By automating the entire process through cloud-hosted decision engines, from application to approval, lenders can lower operational costs, accelerate approval times, and enhance the customer experience. This comprehensive, end-to-end automation also ensures that credit risk management remains robust while providing a seamless customer journey. A holistic, customer-centric approach Ultimately, responsible lending in a digital-first world involves more than simply adopting technology for efficiency. It is about employing digital tools and decision systems to make fair, transparent, and informed choices that prioritise the customer’s financial well-being and foster ethical lending practices. By embracing a more holistic, customer-centric approach, lenders can better manage risk, identify vulnerable customers early, and ensure positive, sustainable long term customer outcomes.

Firing on all cylinders
Embrace open banking for operational efficiency

Published 17 April 2025

For many lenders, the affordability assessment process is still weighed down by long application forms and manual reviews from underwriters, leading to long processing times. Brandon Wallace, Product Manager at Bud, explains how enriched transaction data can help lenders to cut costs and scale efficiently, in addition to increasing approval rates and reducing risk.   What is enriched transaction data? Using open banking and enrichment models, fintechs like Bud take raw, unstructured, messy transaction data and identify categories, merchants, locations and regularity of transactions. This data can then be analysed to provide insights so that lenders can quickly assess affordability without relying on cumbersome manual reviews. Faster decisions, lower costs One of the biggest operational challenges lenders face is the resource it takes to manually assess applications. Trawling through bank statements to verify income, understand spending patterns, and understand whether a customer can service a loan are all critical tasks, but are time consuming and tedious steps that slow down decision making. “AI can help automate workflows and processes, work autonomously and responsibly, and empower decision making and service delivery.” according to a report from Google Cloud. Use of enriched transaction data means lenders can automate much of this process. They can verify income, organise spending into categories such as ‘essential’ and ‘non-essential’ spend, surface risky activity (such as problematic gambling, debt collection agency transactions or loan stacking) and identify trends. This reduces processing time and allows underwriters to spend their time on high value tasks rather than data entry and analysis. With these efficiencies, lenders significantly reduce processing times. At Bud, one of our clients cut application times from 40 minutes to under five minutes, while another reduced processing time by 25% for returning customers and 16% for new ones. Reduce friction for applicants A smoother application process isn’t just beneficial for lenders – it’s also a major win for customers. By integrating open banking, lenders can remove friction points such as document uploads, manual income verification and long decision wait times. One of our clients at Bud is now processing 75% of applications in under 15 minutes. These customer experience improvements lead to higher application completion rates and increased conversion. Scaling without compromising accuracy As lenders grow, maintaining high-quality affordability assessments at scale becomes increasingly difficult. Traditional affordability checks, relying on manually reviewing bank statements and credit reference agency data, lack real-time insights and create bottlenecks. Enriched transaction data provides a categorised, real-time view of customer finances, enabling faster, more accurate assessments. Bud’s affordability tools also help lenders standardise affordability checks across large volumes of applications. By automating aspects of the affordability assessment process and reducing manual intervention, lenders can scale up their operations without increasing costs proportionally. The future of lending operations Lenders must find ways to operate more efficiently without sacrificing the quality of their lending decisions. The benefits of open banking and enriched transaction data are much greater than simply assessing risk. They can transform operations, improve scalability and reduce costs. With the right partner, …

Technology and ethics
Delivering financial stability in a rising tide of unsecured debt

Published 17 April 2025

Unsecured debt in the UK reached an average of £4,287 per adult in 2024, marking a troubling trend as household debt has steadily risen over the past two decades. With household debt now exceeding £2 trillion, its impact extends beyond finances, deeply entwining with mental health challenges. Over 1.5 million people in England face both debt and mental health issues, with 40% of those affected citing financial stress as a key factor in their struggles. The cycle of growing financial anxiety and declining mental health highlights the urgent need for a compassionate, effective approach to debt recovery. Unfortunately, traditional methods, such as repetitive calls or generic communication, often exacerbate the problem, leaving consumers feeling overwhelmed and unsupported. Advancing technology to transform debt recovery The debt recovery sector is turning to technology to create more efficient and humane processes. The global debt collection software market, valued at $4.8 billion in 2024, is projected to reach $11.3 billion by 2033, driven by innovations like AI and machine learning. These tools enable automation, enhance efficiency, and remove much of the stress associated with financial recovery. AI-driven personalisation, automated reminders, and self-service portals offer tailored experiences that respect individual circumstances. Data analytics and automated workflows also help agencies identify patterns and insights, enabling them to develop personalised repayment strategies and offer proactive solutions before debts spiral. For example, AI can pinpoint optimal contact times, reducing hassle for debtors while increasing recovery success. These advancements not only improve recovery rates but also reduce operational costs, creating a more seamless and supportive process for all parties involved. Ethics and empathy at the core While technology is essential, ethical standards and empathy must remain central to debt recovery. Collections teams should prioritise understanding and open communication, fostering achievable payment plans that reduce financial strain without undue pressure. Building trust and maintaining positive client relationships are vital to success. Behind every debt is an individual navigating complex circumstances. Agencies that leverage technology to provide flexible, respectful solutions will stand out as leaders in the evolving debt recovery landscape. The future lies in balancing cutting-edge tools with human understanding, ensuring a process that supports consumers without feeling punitive or overwhelming. The sector’s shift toward a tech driven, ethical approach benefits all stakeholders. By focusing on efficiency and empathy, agencies can deliver tangible results while improving the financial and emotional well-being of those they serve. How dealerships should react Dealerships must stay ahead of evolving customer expectations. The increasing role of technology in the customer experience highlights the potential of cryptocurrency as a future trend. For dealerships uncertain about the path forward, understanding the pros and cons of cryptocurrency and the steps required for implementation is crucial to preparing for potential shifts in the industry.