Despite the hype, research by IDEX Biometrics has revealed that mobile payments are almost as unpopular as cheques. In fact, the payment card is still the number one payment method when it comes to in-store purchases for UK consumers. Three quarters (75%) of respondents stated that they use cards, including contactless, most often, compared to cash (21%), mobile payments (3%), and cheques (1%).

Unfortunately, there doesn’t seem to be a glimpse of hope for mobile payments on the horizon, with 72% stating they are concerned about the possibility of no longer having access to a physical debit card and needing to rely on mobile payments only.

It seems consumers’ personal attachment to the payment card is virtually unbreakable. Nearly two-thirds (65%) of respondents stated that carrying their debit cards provides a sense of security. It’s not surprising then that 75% say they always take a debit card with them when they leave the house. 65% of those questioned said that they wouldn’t give up their debit card in favour of mobile payments and a further 78% admit to feeling more secure using their debit card in comparison to mobile payments.

A further 60% also stated they would be worried people would have access to their accounts if they lost their mobile phone, amplifying the clear consumer distrust in mobile payments and their personal attachment to payment cards.

“It is evident that the UK public won’t be ditching payment cards in favour of mobile payments in the near, or even distant, future. Banks must face this and innovate with cards, which have stayed largely the same for decades,” comments Dave Orme, IDEX Biometrics SVP.

“With a resounding 53% of consumers stating they would trust the use of their fingerprint to authenticate payments more than the traditional PIN, this must be where the UK banking industry focuses its attention. Chip and PIN is now 12 years old, and has seen its course. It is time to elevate the traditional payment card and evolve authentication methods to make contactless transactions even more convenient and secure by adding seamless fingerprint biometric authentication”, added Orme.

(Source: IDEX Biometrics)

Recent independent research of UK employees commissioned by expenses management software company Expend has highlighted that Generation Z and Generation Y employees are the most negatively impacted by facilitating their employers’ expenses. Over a quarter (27%) of Generation Z employees (18-24 year olds) have not been able to pay off credit card bills because they have outstanding company expenses due to them from their employer.

This appears to be making younger employees the least tolerant of existing processes for expenses - 82% of UK Generation Z employees find being out of pocket from expenses very unfair and 42% would move jobs because of a poor expense policy.

The average amount of debt for a University leaver is now £50,000, and yet the average starting salary for most graduates is £19,000 - 22,000. According to the ONS, wage growth slipped to 2.7% from 2.8% in the three months to May 2018. However, despite the slowdown in wage growth and increased cost of living, young employees are still expected to float expenses for the business. These factors combined mean that younger workers are more financially sensitive than ever before, and yet are still expected to pay their employer’s expenses and go out of pocket each month, which can have a significant impact on their personal finances.

Expend’s independent research, which was commissioned in conjunction with OnePoll, showed the scale of this impact on employees’ finances and willingness to circumvent expense policies. Out of all age groups, Generation Z workers are most likely to circumvent the expenses policies of their employer, with over a quarter (27%) stating they would spend more than they normally would to make a company expense worthwhile, if they could get away with it. Nearly 1 in 5 (18%) of Generation Z employees stated they would profit from business expenses if they could get away with it.

The picture for Generation Y/Millennials (25-34 year olds) isn’t much better. Research from independent think tank The Resolution Foundation has shown that UK millennials are now some of the worst off financially in the developed world, only behind Greece. The home ownership rate in their late 20s, at 33%, is half that for the baby boomers at the same age (60%). Our research showed this age group would be the least inclined out of all respondents to take a job if it had a poor expense policy, with 40.87% saying they wouldn’t.

On the other hand, the older age groups are disproportionately tolerant of the existing system of expense, with the 55+ age group is the least likely to circumvent expenses because of a poor expense policy, and only 4.90% saying they would expense items they shouldn’t if they could get away with it.

Johnny Vowles, CEO of Expend said, “younger employees have a hard deal at the moment with rising living costs, wage growth described as ‘anaemic’ by the ONS and higher than ever student debt. While the current expenses system is just the way things have always been done, for some employees this could be the straw that broke the camel’s back. Organisations need to look at how all processes are impacting on their younger workforce, to encourage recruitment of happy workers but also to minimise the business risk. Disenfranchised younger workers more open to circumvent expense policies and profit from them than even before, so employers also need to gain greater oversight over their company finances to protect themselves.”

(Source: Expend)

Credit management has a vital role to play within any business. Its primary aim is to ensure customers pay their outstanding balances within the pre-agreed timeframes. When implemented effectively, it helps reduce late payments and improve cashflow, in turn driving a more positive liquidity position for the business. Below Martin de Heus, VP of Direct Sales at Onguard, explains for Finance Monthly.

All of this is fundamental to the work of the credit manager. Unfortunately, however, credit management departments don’t always believe their job also entails keeping the customer happy. Whereas sales and customer service departments might be trained in the arts of charm and diplomacy, credit management teams are more likely to value persistence and tenacity. After all, organisations want outstanding invoices paid as quickly as possible.

The issue is that the role of the credit management department also needs to be about maintaining positive customer engagement. Sales and customer service departments will have done their best – with the help of various tools and technologies – to get to know the customer and ensure their satisfaction. Maintaining this positive relationship is generally much trickier if the customer falls into debt.

It’s a delicate situation. The wrong approach may negate any early groundwork and jeopardise a potential long-term relationship. Nonetheless, these customers are in the credit manager’s portfolio for a reason: experiencing payment difficulties, in arrears or have already been transferred to a collections agency.

The organisation wants to keep Day Sales Outstanding (DSO) as low as possible, however the customer still expects to be treated well and with respect. Respectively, how can organisations create a positive customer experience despite these payment difficulties?

As credit managers are aware, the reasons for non-payment differ greatly between customers; there is never a ‘one size fits all’ approach. Some may be experiencing temporary difficulties. For example, an understaffed accounts department with a high workload might mistakenly overlook an open invoice. While some always pay late as a matter of policy, and others are genuinely facing cash-flow problems.

Because of these differences in circumstances, all these will act favourably to a personalised approach.

Today there is technology available that monitors each customer’s order to cash journey and this will segment customers, assessing who the customer is, what they need, what the risks are, their payment behaviour and how they prefer to communicate. Automated reminders, processes and actions can be created based on these segments. Consequently, communication with a customer who always pays late will differ from those with the customer who simply forgot to pay an invoice. This functionality provides customers with the attention they need, while at the same time, giving credit managers more time to focus on exceptions.

Because this software provides insights on the entire order to cash process, all stages of the journey can be optimised and KPIs achieved. This may include lowering the DSO, optimising cash flow, improving the ability to focus on the core business and focusing on a positive customer experience. It also gives a fully integrated overview of the cash flow forecasting and outstanding debts.

In short, a positive experience and the lowest possible DSO can co-exist – and a credit management team can focus on the customers’ needs and requirements. After all, with the right care and attention, a late-payer can suddenly transform into a loyal customer – and one that pays on time.

Data released in Creditsafe’s Prompt Payment Premier League has revealed Huddersfield FC takes on average 53 days beyond payment terms to pay invoices for its suppliers, the worst of any team from England’s top division.

Meanwhile Brighton & Hove Albion, who like Huddersfield are playing their first season in the Premier League, top the rankings, taking only two days beyond payment terms on average to pay suppliers. None of the current Premier League clubs pay businesses within the agreed payment terms however, with the average time to pay suppliers across all the clubs standing at 12 days.

Swansea City, who alongside Brighton takes only two days beyond terms on average to pay invoices, have the highest average value of unpaid invoices at £11,304. This is almost £7,000 above the league average, which stands at £4,385.

Liverpool are the only club in this season’s top six to better the overall league average, taking seven days to pay suppliers, with runaway league champions Manchester City ranking 16th overall at 12 days. Last year’s champions Chelsea have the second worst record of prompt payments, taking on average 30 days beyond terms to pay.

Last year’s worst offenders to still be playing in the Premier League, Manchester United, have only improved their ranking slightly, rising two places from 19th to 17th.

Chris Robertson, UK CEO said: “It’s still surprising to see that even in the Premier League, where the clubs have never been wealthier, late payments are becoming a growing problem for businesses of all sizes to deal with.

“It’s also striking to see the gap between two of the newest clubs to enter the Premier League, each having totally different attitudes to paying suppliers promptly. It’s clear that being a new club in the league, such as in Huddersfield’s case, is no excuse for paying businesses significantly later than their agreed terms with suppliers, especially when Brighton were able to pay their invoices much more promptly.

“The money Premier League clubs receive through the new television rights deal will total more than £5bn over the next few years, so we can only hope the clubs become better in paying their invoices on time with this additional revenue.”

(Source: Creditsafe)

Banks and card companies prevented £1,458.6 million in unauthorised financial fraud last year, equivalent to £2 in every £3 of attempted unauthorised fraud being stopped, the latest data from UK Finance shows.

In 2017, fraud losses on payment cards fell 8% year-on-year to £566.0 million. At the same time, card spending increased by 7%, meaning card fraud as a proportion of spending equates to 7.0p for every £100 spent – the lowest level since 2012. In 2016 the figure stood at 8.3p.

For the first time, annual data on losses due to authorised push payment scams (also known as APP or authorised bank transfer scams) has also been collated. A total of £236.0 million was lost through such scams in 2017.

The unauthorised fraud data on payment cards, remote banking and cheques for 2017 shows:

• Combined total losses fell by 5% to £731.8 million.
• Losses due to unauthorised transactions on payment cards fell 8% year-on-year to £566.0 million. The industry helped prevent £984.9 million in attempted unauthorised card fraud.
• Losses due to unauthorised remote banking fraud totalled £156.1 million, a 14% rise on 2016. Banks prevented £261.4 million of unauthorised remote banking fraud, 27% more than last year.
• Cheque fraud losses fell 28% in 2017 to £9.8 million. This is the lowest annual total on record. £212.3 million of attempted unauthorised cheque fraud was prevented.
• There were 1,910,490 reported cases of unauthorised financial fraud, a rise of 3% compared to the year before.

The new authorised push payment scams data, collected for the first time in 2017, shows:

• There were 43,875 reported cases of authorised push payment scams with a total value of £236.0 million. 88% of this total were retail consumers, losing an average of £2,784, and the remainder were businesses who lost on average £24,355 per case.
• Financial providers were able to return £60.8 million (26%) of the authorised push payment scam losses in 2017.

Katy Worobec, Managing Director of Economic Crime at UK Finance, said: “Fraud is an issue that affects the whole of society, and one which everyone must come together to tackle. The finance industry is committed to playing its part – investing in advanced security systems to protect customers, introducing new standards on how banks respond to scam victims, and working with the Joint Fraud Taskforce to deter and disrupt criminals and better trace, freeze and return stolen funds.

“We are also supporting the Payment Systems Regulator on its complex work on authorised push payment scams, providing the secretariat for its new steering group. It’s a challenging timetable, but it is important that we get it right to stop financial crime and for the benefit of customers.”

The finance industry is responding to the ongoing threat of all types of fraud and scams by:

• Helping to prevent customers being duped by criminals by raising awareness of how to stay safe through the Take Five to Stop Fraud campaign, in conjunction with the Home Office.
• Working with government and law enforcement to deter and disrupt criminals and better trace, freeze and return stolen funds, while calling for new powers on information sharing to allow banks to share data to detect and prevent financial crime better.
• Implementing new standards to ensure those who have fallen victim to fraud or scams get the help they need, including around-the-clock availability of fraud teams, to make it easier and better for the customer, and, where possible, improve the likelihood of their funds being recovered. UK Finance will also be the secretariat for the PSR’s new steering group on authorised push payment scams².
• Working with government on making possible legislative changes to account opening procedures to help the industry act more proactively on suspicion of fraud and prevent criminals from accessing financial systems.
• -Rolling out the Banking Protocol – a ground-breaking rapid response scheme through which branch staff can alert police and Trading Standards to suspected frauds taking place – to every police force area in the UK. In 2017, while it was still being introduced across the country, the Protocol prevented £13.3 million of fraud and led to 129 arrests.
• Sponsoring the Dedicated Card and Payment Crime Unit⁵, a specialist police unit which tackles the organised criminal groups responsible for financial fraud and scams. This has led to a combined value in savings and disruptions in criminal activity of close to £30 million in 2017.
• Exploring new ways to track stolen funds moved between multiple bank accounts.

To help everyone stay safe from fraud and scams, Take Five to Stop Fraud urges customers to follow the campaign advice:

• A genuine bank or organisation will never contact you out of the blue to ask for your PIN, full password or to move money to another account. Only give out your personal or financial details to use a service that you have given your consent to, that you trust and that you are expecting to be contacted by.
• Don’t be tricked into giving a fraudster access to your personal or financial details. Never automatically click on a link in an unexpected email or text.
• Always question uninvited approaches in case it’s a scam. Instead, contact the company directly using a known email or phone number.

Tony Blake, Senior Fraud Prevention Officer at the Dedicated Card and Payment Crime Unit, said: “With criminals using social engineering to target people and businesses directly, it’s vital that everyone follows the advice of the Take Five campaign. Always stop and think if you are ever asked for your personal or financial details. Remember, no bank or genuine organisation will ever contact you out of the blue and ask you to transfer money to another account.”

Unauthorised fraud

In an unauthorised fraudulent transaction, the account holder does not provide authorisation for the payment to proceed and the transaction is carried out by a third-party.

Authorised fraud

In an authorised push payment (APP) scam, the account holder themselves authorises the payment to be made to another account. If a customer authorises the payment themselves, current legislation means that they have no legal protection to cover them for losses – which is different for an unauthorised transaction.

Banks will always endeavour to help customers recover money stolen through an authorised push payment scam but customers typically only approach their bank after the payment has been processed, once they realise they have been duped. By this time the criminal has often withdrawn the stolen funds and the customer’s money has gone. Alongside the extensive work already underway through the Joint Fraud Taskforce, UK Finance is also currently working with the Payment Systems Regulator on its proposals to tackle these scams.

Behind the data

Fraud intelligence points towards criminals’ use of social engineering tactics as a key driver of both unauthorised and authorised fraud losses. Social engineering is a method through which criminals manipulate people into divulging personal or financial details, or into transferring money directly to them, for example thorough impersonation scams and deception.

In an impersonation scam, a fraudster contacts a customer by phone, text message or email pretending to represent a trusted organisation, such as a bank, the police, a utility company or a government department. Under this guise, the criminal then convinces their victim into following their demands, sometimes making several separate approaches as part of one scam.

Data breaches also continue to be a major contributor to fraud losses. Criminals use stolen data to commit fraud directly, for example card details are used to make unauthorised purchases online or personal details used to apply for credit cards. Stolen personal and financial information is also used by criminals to target individuals in impersonation and deception scams, and can add apparent authenticity to their approach.

(Source: UK Finance)

Price comparison experts Money Guru conducted a survey of 1,000 UK credit card holders. This uncovered a deep-rooted misunderstanding of credit card agreements.

The majority of credit cards can now be signed up for online. This means with no one there to talk you through each point, the agreement needs to be detailed and cover every legal aspect. But does anyone really read the fine print? And if not, why not?

The national survey revealed that 64% of people don’t read their credit card agreement before signing on the dotted line. They also uncovered the banks with the worst readability score for credit card agreements.

Other shocking stats include:

• 60 % of people don't read any updates to their credit card agreements
• 64% of people think credit card agreements are lengthy
• Only 9% of people understand their credit card agreements
• 48% of Brits don't know when they are liable for charges made on their card by someone else
• 50% of people don't know when they must be notified of any changes to their credit card agreement
• 33% of Brits don't know that their credit card score can be affected after just one missed payment

The majority of credit cards can now be signed up for online. This means with no one there to talk you through each point, the agreement needs to be detailed and cover every legal aspect. But does anyone really read the fine print? And if not, why not?

In this age of digital consumerism, when virtually anything you want is just a click away, it’s worrying that we could be agreeing to things we don’t understand. Skipping the terms and conditions page is something we’ve all done. So, we decided to dig deeper and find out if our fears were unfounded or just the tip of the iceberg.

We conducted a survey of 1,000 credit card holders in the UK. Combined with research on the most popular credit card providers and their most popular offerings from our comparison website, we were able to find out more about the level of understanding from the British public.

How readable is your credit card agreement?

The Flesch Kincaid score is a readability test, commonly used in education. It uses word length and sentence length to determine how easy a piece of text is to read, equating it to the US school grading system. The lower the number, the easier the content is to read. We ran both standard credit card agreements for each provider through this test, as well as the card specific information on their website, given before you apply. The results were disappointing. In our research not one of the agreements was rated below 6th grade, which equates to the reading level of 11 and 12 year olds. Not bad, you may think. But the national average reading age for the UK is 9 years old.

The Flesch Kincaid Reading Ease score also takes into account syllables within a sentence and is based on a score of 0-100. The higher the score, the easier the text is to read. The UK Government advises to aim for an average sentence length of 12 words and a reading ease score of 60 or over. A higher number of syllables within a sentence indicates more complicated wording.

How complicated is the text?

In the graph above, we can see that standard agreements contain far more complicated wording, which could prove problematic for those trying to read and fully understand the text. With the exception of the Vanquis credit card, the information contained in the pre-apply pages appears less complex. While this might be great for helping you to understand the product before you sign up for it, it’s not the official document you actually agree to.

Out of 22 agreements and information that we ran through this test, only two fell below the average 12 words per sentence.

Are you bored reading it?

If you are able to understand the agreement, one thing that might still might make you skim it or not read it at all, is the length.
The reading time for standard agreements is generally much longer than the pre-apply information and it’s not surprising, given they are on average 16 times wordier than their pre-apply counterparts.

What our research told us

Our research was pointing us towards the following;

Both credit card standard agreements and the pre-apply information available on websites is not easy enough for the average UK person to read and understand well.

Pre-apply information usually contains less complicated text and is longer overall, taking more time to read.

Sentence length for both standard agreements and pre-apply information was over and above the recommended number of words.

The British public had their say

This paints a picture much like the one we thought might emerge. Credit cards agreements, terms and conditions and pre-applying information is often difficult to read for many reasons. But is this reflected in real life?

We conducted a survey of 1000 UK people. The results showed that;

• 64 % of people don't read a credit card agreement before signing up for one.
• Only 9% of people understand their credit card agreements.
• Almost half of all Brits could be paying too much on their credit card because they don't know how to dispute a charge.
• 48% of Brits don't know when they are liable for charges made on their card by someone else.
• A third of all Brits are unaware of how their credit score can be affected after missing a payment.

64% of people surveyed admitted that they didn’t read the full agreement when signing up for a credit card. 60% also said they don’t read any updates to their agreement and simply click accept.

This can be explained, in part, by how Brits view those agreements. When asked to describe their credit card agreement in one word, 12% said “confusing”, 15% thought “unreadable” and 64% called them “lengthy!”

The survey also found that 45% of people didn’t know how to dispute a charge on their credit card, which could mean that they are paying unnecessary fees. If you’re unsure of any recent charges or fees, it’s advisable to check, especially as your agreement can change at any time. 13% of our respondents didn’t know this.

When it comes to knowing how and when you’re protected from someone else using your card, almost half of those asked didn’t know their rights. In fact, if you have compromised your own security, such as losing your card and not reporting it or not using your providers authentication portal during a purchase, you are liable for any costs made to your card under those circumstances.

Your credit score or credit report details your financial history. Its purpose is to inform potential lenders how reliable you are likely to be when it comes to paying money back. If you forget to make a payment on your credit card one month, do you think it affects your credit score? Even if you’re successfully paying rent or a mortgage and other bills on time? The answer is yes! And a third of all Brits are unaware of this, thinking that missing a payment will either not affect your score or will only affect it if you miss payments repeatedly.

Attempts have been underway in Parliament recently to help tenants improve their creditworthiness. This includes new legislation to make lenders give rental payments the same weight as mortgage premiums, including most recently Big Issue founder Lord Bird’s draft Creditworthiness Assessment Bill.

Open Banking - ahead of any future legislation - offers tenants the potential to achieve improved creditworthiness at no extra cost.

The launch of Open Banking in the UK last month, backed by nine key UK banks, is now enabling renters who want to get a mortgage to improve their creditworthiness with an ease that would have been unimaginable only a year ago, says CreditLadder.co.uk.

Instead of onerous paperwork or agent/landlord permissions - as has been the case in the past - tenants are now able to report their rental payments via mobile/online platforms simply, quickly and for free.

Tenants tell their bank they want the platform to ‘read’ their rental payments and pass this information on to a credit reference agency, such as Experian.

“When we launched our Open Banking service last month we were acutely aware that the take up maybe held back given the newness of the technology,” says CreditLadder CEO Sheraz Dar.

“But so far Open Banking is proving popular with our customers. The number of people signing up to our service has doubled and last week 80% of those applying to join our service now do so via Open Banking.

“Many of the UK’s 11 million private renters are finding it harder and harder to get on the property ladder, so it’s no surprise that a service like ours which gives them a leg-up is proving popular.

Case study

Civil Servant Ian Cuthbertson, 33, from Norwich is the first person in the UK to sign up and register his rental payments with a credit agency using CreditLadder’s Open Banking service, which is provided through an FCA-regulated partner.

Ian pays £700-a-month for a two-bedroom barn conversion he shares with his partner on the outskirts of Norwich, payments that are now being added to his credit history via CreditLadder.

“My partner and I are planning to buy a home in a few years’ time so I’ve been realising more and more that I need to improve my chances of getting a mortgage,” he says.

“So I’ve been looking at how I manage my credit cards and trying to make little tweaks here and there to my finances so that I present myself as trustworthy to lenders.

“I was thinking to myself that I pay the rent on time every month and wondered if that could count towards my credit score. And then I saw an article on MoneySavingExpert.com about CreditLadder so I decided to sign up.

(Source: CreditLadder)

From democratising data to driving value, blockchain has a lot of potential to improve on some of the credit industry’s greatest challenges. Here Alexander Dunaev, Co-Founder and COO at ID Finance, delves into how blockchain could disrupt credit agencies all over the world by providing a solution to address the broken and archaic data practices at the credit bureaus.

Blockchain is driving a paradigm shift in how we deal with data, rewriting the rulebook around approaches to data management, transparency and ownership. While digital finance is cutting the cost of serving the underbanked to drive financial inclusion, blockchain could offer a way of widening access to even greater numbers of consumers excluded from mainstream financial services.

Within lending, where we see blockchain having the biggest impact is on transforming the credit bureaus. The technology offers a much-needed solution to address the inefficiencies associated with data security, ID verification and data ownership.

Credit bureaus are not infallible

Although a number of new ways are emerging to determine loan eligibility, the largest banks and financial services providers still rely heavily on an individual’s credit history, sourced from credit agencies such as Equifax, Experian and TransUnion and its corresponding FICO score. Indeed 90 per cent of the largest US lending institutions use FICO scores.

The way in which credit histories are stored and accessed by corporates has historically made a great deal of sense and offered a multitude of benefits. It regulates how the data is stored, audited and accessed, and bestowing a government seal of approval provides the necessary level of trust among and consumers and contributors (i.e. the banks).

The severity of the recent Equifax data breach however – described by US Senator, Richard Blumenthal as ‘a historic data disaster,’ – where personal records for half of the US were compromised, exposed a number of critical flaws and vulnerabilities. Experian also suffered a breach in 2015, which affected more than 15 million customers.

In spite of the supposedly robust data storage safeguards, the hacks highlight that these databases are simply not safe enough and are certainly not immune from intrusion.

With first hand experience of dealing with multiple credit agencies across the seven markets ID Finance operates, I believe there are three key ways blockchain could address the inefficiencies associated with having a centralised credit system:

1) Reducing the costs and complexities associated with data verification:

Achieving a comprehensive view of a borrower’s financial discipline and credit capability requires extensive verification and evaluation throughout the lending process. This is both time consuming and costly particularly when multiple credit bureaus exist in a country.

As data isn’t shared among the credit agencies, each will inevitably hold a varying report of an individual’s credit history meaning we need to engage with all of the providers to gain a consolidated view of a borrower’s financial health.

The combined revenue of Experian, Equifax, TransUnion and FICO in 2016 was c. $15bn. These are the fees paid for mostly by the banks, to access the credit histories needed to carry out their day-to-day lending activities. In the most simplistic sense this is $15bn of fees and interest charges passed on to, and overpaid by the end user – via higher lending APRs – for the privilege of having access to credit.

At the same time the regulatory compliance surrounding the storage and distribution of credit histories creates high barriers to entry making the market oligopolistic and hence less competitive. It is hampering the ways and locations in which businesses can lend.

In short, we have a process whereby consumers are paying the steep price of having a centralised credit history facility, which isn’t immune to data breaches, while frequently creating hurdles for financial services firms to actually access the data. This process is broken and out-dated.

2) Blockchain as a key value driver in lending:

Blockchain – a tamper-proof ledger across multiple computers with data integrity maintained by the technological design rather than on an arbitrary administrative level – has the potential to address the broken and archaic data practices at the credit agencies.

Until recently there was no alternative to having a robust authority managing the credit database. However, it is precisely the lack of a centralised authority, which makes blockchain so suitable for the ledger keeping activity, and is what facilitated the most proliferated application of the technology within cryptocurrencies where reliability is key.

Storing the data across the blockchain network eliminates errors and the risks of the centralised storage. And without a central failure point a data breach is effectively impossible.

Without intermediaries to remunerate for the administration of the database, the cost of data access drops dramatically, meaning lenders can access the data without having to pay the ‘resource rent’ to the credit agencies.

3) Democratising data and handing ownership back to individuals:

As the data is no longer held in a central repository, ownership is handed back to the ultimate beneficiaries – the individuals whose data is being accessed. Borrowers will have constant and free access to their own financial data, which is rightfully theirs to own, and potentially monetise without the risk of identity theft and data leakages.

Blockchain can address the limitations of the credit system and boost financial inclusion as a result. The technology offers security, transparency, traceability and cost advantages, as well as achieving regulatory compliance and risk analysis.

While it may be too soon to predict the exact impact of blockchain in lending, what is apparent is the centralisation of the credit industry isn’t working. It’s time to rip up the rulebook and start afresh and blockchain offers a compelling solution.

What if The Apprentice (UK) was actually a credit based show rather than a strategy play? Below, Cato Syverson, CEO of Creditsafe, discusses for Finance Monthly the ‘real winner of the show’, if the win depended solely on the contestants’ past dues, credit history and debt.

This year’s series of the popular television show, The Apprentice is now in full swing. The reality TV show - now in its thirteenth series – sees 18 hopeful businessmen and women compete to become Lord Alan Sugar’s latest business partner, with the eventual winner scooping a £250,000 investment into their proposed business venture. But how does Lord Sugar whittle the 18 potential candidates down to one? What is he looking for in a business partner? By the looks of the latest series, it’s not their business or credit history.

Using Creditsafe data, we have analysed who the real winner of the Apprentice 2017 should be and who the riskiest investment would be for Lord Sugar, based purely on the contestants’ financial and business history, past success and acumen. We devised a simple scoring model to rank the candidates, considering factors such as the profitability of current businesses they own, credit ratings and whether they’ve received any County Court Judgments (CCJs).

The results indicate that interestingly, week three casualty Elliot Van Emden was the safest bet for Lord Sugar and should have been the real winner of this year’s series. With a credit rating of 95, a net worth of £27,006 and no CCJs to his name, Elliot was a strong contender and the least risky candidate in this year’s competition.

Most surprisingly, Elizabeth McKenna, one of this year’s most talked about and controversial candidates, is now the least risky candidate for Lord Sugar to enter into business with. Elizabeth has a net worth of £36,940, no CCJs and five current business appointments making her a solid choice, even though the florist has irritated a number of candidates on the show. Luckily, this week, she managed to dodge being firing by Lord Sugar when she was brought back into the boardroom as sub-team leader. At the other end of the spectrum, Bushra Shaikh has two dissolved companies under her belt, a very low credit score of 49 and one CCJ to her name, making her the least advisable selection for Lord Sugar.

While there isn’t a strict set of rules about choosing a business partner, there are warning signs to be aware of when faced with this decision: For example, if a director has any previous failures buried in their business history. Our data shows that if a director has been involved in a company that has failed in the last three years, they are nine times more likely to fail again compared to a director who has never been involved with a business collapse.

In addition, it is wise to check whether candidates have links to any businesses with low credit scores. Many businesses are owned by or have links with other companies, and how they’re performing financially can have a knock-on effect. This means it’s sensible to look at all linked companies credit reports to check you won’t be impacted by a low credit score or poor payment history of another business in the future.

We have a few more weeks to wait and see who Lord Sugar chooses as his next business partner, but it will be interesting to see if he takes a risk or makes a safe bet. Who you enter business with can have a significant impact on both your financial performance and reputation, and therefore doing your homework on potential candidates is critical for success.

Figures released by UK Finance find the number of debit and credit card transactions grew by 12% in the UK in the year to the end of June, the highest annual rate since 2008. The value of spending also rose, accelerating to 7.2%.

Lenders are currently facing the pending challenge of upping their game after The Bank of England's Prudential Regulation Authority (PRA) highlighted the need to address lending concerns.

Ian Bradbury, Chief Technology Officer, Financial Services Business at Fujitsu UK and Ireland, told Finance Monthly:

“With the use of contactless payment cards soaring by over 140% in the past year alone, the news that UK credit and debit card spending is growing at its fastest rate in nine years comes as no surprise. We expect contactless payments to become an increasingly important feature in the British payments landscape. Making up around a third of all plastic card transactions – up from around 10% just a couple of years ago – the convenience and ease of contactless payment means that such transactions are continuing to gain traction with the public. Not only this, the high-growth adoption of contactless payments underlines the fact that consumers and retailers choose to adopt solutions that are secure, quick and easy to use, as well as ubiquitous.

Contactless payments are not only easier to use than Chip and Pin, they are in many ways more practical than small change and small notes. The significant parallel growth in debit card transactions also suggests that this is not growth just fuelled by debt and easy credit – much of this increase will be a result of contactless payments being made purely due to ease. What’s more, contactless payments have the added value of fuelling other payment solutions such as Apple and Google pay and other wearable technology – which can’t be done as easily with Chip and Pin.

Finally, the success of contactless payments demonstrates that consumers are quick to adopt new payments solutions that focus heavily on improving the consumer experience. However, because consumer experience can cover many aspects including convenience, security, speed and ubiquity, it’s vital that providers put in place ways to improve the experience over current solutions. If future payment solutions do not address all of these areas – which are fast-becoming a customer expectation – then they are unlikely to be successful.”

Data released in Creditsafe’s Credit Worthiness Premier League, has revealed that Chelsea is set to be relegated from the 2017 Premier League – if the final standings were based on company credit ratings.

Despite having a turnover of over £335million, the football club finds itself with the third worst credit score in the Premier League, with a poor debt/asset ratio and an average of paying invoices 28 days beyond the agreed payment terms, contributing to the club’s low credit rating (45).

The credit scores have been calculated using Creditsafe’s rating model. It combines financial variables including trade payment information, financial ratios, industry sector analysis and director history to assess the risk of insolvency. The algorithm then provides a rating between 0-100 – the higher rating, the better the score.

The teams joining the 2016/17 Premier League champions in the relegation zone are Premier League new boys Newcastle United and Brighton Hove Albion, who have a credit rating of 27 and 21 respectfully.

At the other end of the table, Manchester City (96) is crowned champions just ahead of Leicester City (93), who were the champions of last year’s Credit Worthiness Premier League, with the same credit score. Manchester City who finished 6^th in last year’s table with a score of 89, has taken the title this year while enjoying a second successive year of profit and a strong debt/asset ratio which has helped its credit score increase.

Rachel Mainwaring, Operations Director at Creditsafe UK said: “Unfortunately the success of Chelsea last season has not been reflected in its position in our alternative Premier League, as they slip in to the relegation zone, down from 13^th in last year’s table.

“As we have seen through the release of clubs’ financial reports and the transfer fees being paid this summer, football clubs are now dealing in extremely large sums of money. With this being a trend set to continue, having a credible credit record will enable Premier League clubs to demonstrate solvency, secure funding and deliver success to the fans.”

John Mould, Chief Executive Officer of ThinCats, shares his thoughts with Finance Monthly on the ins and outs of loan grading, also known as loan scoring.

Credit scoring in the wider world is well documented, and loved and hated in equal measure. But when it comes to accurate analysis in the alternative finance industry, there is huge variability across the platforms.

Because the direct lending industry is relatively young within the finance sector, few platforms have had the chance to build up data-rich, seasoned loan books to use for developing risk prediction models. As a result, many rely on scorecards developed using information from the wider UK universe of companies, partner with credit reference agencies, and use a mixture of off-the-shelf credit risk scorecards, their own metrics and human judgement.

Commercial Credit Data Sharing (CCDS) is expected to kick off later this year; a scheme launched in April 2016 that requires nine major banks to share credit information on all their (willing) SME clients, furnishing finance providers, including alternative lenders, with a wealth of current account and credit information not previously available. This is expected to provide a considerable uplift in the accuracy of credit scoring models over time, and hopefully will facilitate the alternative finance industry in serving a host of currently overlooked smaller businesses.

However, it is not as simple as just having access to information; not all grading systems predict the same event. Some are calibrated on publicly-available data, to predict formal insolvency events; others are trained to predict all forms of company closure, insolvency and dissolutions; still others are trained on proprietary (i.e. not publicly available) customer data, including events such as late payments, not necessarily associated with insolvency, as practiced extensively by the main banks. This is the current challenge that data scientists face: building risk models that predict very specific outcomes; accurately reflecting investors’ experience of risk and return, but also affording borrowers fair and objective assessments.

ThinCats has allocated a considerable amount of time and resources to these issues, and the company is in a position to give UK SMEs more than just a number crunching, ‘computer says no’ experience, whilst also protecting the interests of the lenders.

As a secured lending platform, investors’ risk exposure and net returns are driven by both default risk and the ability to recover capital given a default. The ThinCats grading system makes the distinction between these two risk components, providing every loan on the platform with two grades; a number of security ‘padlocks’ and credit ‘stars’.

In order to produce these relative gradings, multi-layered processing models have been developed in-house. The credit grading model consists of an in-depth analysis of the company’s financial health, the ‘Hybrid Financial Score’ and its dynamism, the ‘Dynamic Score’. These scores are combined through multivariate analysis of the observed levels of insolvencies within the calibration data set (approx. 500,000 borrowing companies in the UK) to give a rating of one to five stars for each applicant. Over time, specific information about P2P defaulters as a differentiated segment, will be integrated into the model.

This is complimented by the security grading, represented by a maximum of five padlocks and determined by the asset to loan ratio, based on the value of the borrower’s assets relative to the outstanding loan amount. All loans listed on the ThinCats platform are then professionally qualified by the credit team.

This all combines to produce an award-winning analysis of information, ensuring that businesses looking for loans are given a fair and balanced hearing, and that investors know that each loan has been thoroughly assessed and vetted based on the most accurate information available; a complex system, but one that proves beneficial for borrowers and lenders alike.