The Importance of Modern Tools on Digital Lending

Abound, an open banking provider, recently shared data conveying the potential risks inherent in traditional credit checks, which often overlook key factors in the borrower’s profile—such as a propensity for online gambling.

The Open Banking Approach

Abound emphasizes the importance of leveraging open banking data, which, when incorporated into credit check procedures, can reveal whether a person is a potentially at-risk player. The company points out that lenders who fail to consider this data may unwittingly end up extending loans to such individuals. According to Abound’s calculations, this could amount to risky loans of approximately £174 million ($219 million) being distributed weekly.

Gerald Chappell, CEO of Abound, clarified that most lenders are not intentionally exacerbating harm. Instead, he attributed the issue to the use of outdated tools that fail to accommodate the digital age’s realities. In his opinion, lenders need to modernize their lending practices, especially considering the rising popularity of online gaming and mobile apps.

The Role of Creditors

Debt charity StepChange concurs with Abound’s assessment, pointing out that lenders often struggle to recognize warning signs of gambling harm. According to Peter Tutton, StepChange’s head of policy, lenders need to be more proactive and adopt rigorous checks and affordability assessments.

As part of these assessments, Tutton suggests that lenders should be quick to identify borrowers who might be using credit to fuel their gambling habits. This, he thinks, is a critical step in protecting at-risk players and reducing gambling-related harm.

The concept of affordability checks has stirred considerable debate within the UK gaming industry, especially as the country is making strides to modernize its gaming laws. Many argue that checks based on gambling losses could be effective in minimizing harm. Critics, however, argue that such measures could infringe on personal liberties.

As the debate continues, some gaming companies have taken steps to promote responsible gambling by offering options such as no wagering bonuses. This strategy removes the requirement for players to wager a certain amount before they can withdraw their winnings, reducing the potential risk for compulsive betting.

In conclusion, while the digital lending industry seeks to balance customer liberties with responsible lending, the need for modern tools and practices remains clear. It is pivotal for lenders to keep pace with changing trends and technologies in the digital era.