By Freddy Kelly, CEO and co-founder, Credit Kudos

Consumers are becoming more empowered when it comes to their financial future thanks to myriad factors. From open banking, where bank account information is shared with an approved third party (with your consent), to new challenger banks offering consumer-orientated solutions designed to solve real pain-points, the landscape is changing rapidly. Never before have we seen financial products designed on such a scale to improve financial wellbeing. Innovative apps and online tools are making waves such as AI assistants to help Gen Z’s budget, save and track their spending or apps that help customers save and invest for their future by setting money aside through round ups or regular deposits.

It’s not just personal finance management; every financial sector is being affected. The consumer credit market is a case in point. It provides an excellent illustration of just how much a sector can be disrupted thanks to new technologies and purpose-led, agile, focused fintechs and start-ups on a mission to improve the nation’s financial wellbeing. The result is products and solutions that consumers want, and desperately need, to meet their changing lifestyles – whether they’re a student, flexible worker, digital nomad or a regular employee. And alternative lenders and challenger banks are now firmly on the radar. New research shows that more than one in three (36%) of younger millennials (18-24) chose to borrow from an alternative lender last year, and looking forward, the Equiniti Credit Services report confirms that 64% would be likely to consider an alternative lender over a traditional bank next time they need to borrow money. This rises to 79% among 25-44 year olds.

This doesn’t mean that existing lenders will disappear – it is however clear competition in the sector is rapidly ‘hotting up’. Many are still drawn to the traditional lenders, with 39% of people saying that they would only consider borrowing from a well-known lender. Interestingly trustworthy brands were also cited as potential reputable lenders such as John Lewis and Admiral.

What the research report emphasises is that consumers, and especially the younger cohorts, want a better deal. Their lifestyles don’t suit the cookie cutter approach taken by the traditional lenders; they want a tailored response. The advent of open banking provides the answer for lenders facing tough decisions in order to remain competitive.

60% polled in the Equiniti research would be willing to share their bank account transaction data to an authorised third-party in exchange for a better more personalised mortgage rate. Importantly, the future borrowers of tomorrow are more open to sharing data in exchange for convenience; 70% of 18-24 year olds and 75% of 25-34 year olds. Open banking allows individuals to share real-time bank transaction data, with their consent, in order to provide lenders with an accurate view of a person’s lending profile enabling them to tailor products accordingly. As a result, borrowers could be rewarded with lower rates over the term of their loan – with products and services offered to them all based on their authentic financial behaviour. Or rather than a static, fixed-rate or loan amount set out over several years, new transaction data-based products could flex and adapt to fit changing individual circumstances and lifestyles.

It is the forward-thinking lenders that are already crafting new partnerships to nurture in pioneering products and services that will lead the field. For example, Credit Kudos is working with a number of lending partners to help them create more sustained and deeper relationships with their customers by using open banking data to gain a better understanding of them as individuals.  As a result, they are creating a more central-role for themselves in the lives of their customers.

As we move into the 2020s, consumers’ expectations of personalised services will only increase as they learn more from the positive lending experiences of others. For lenders, the ability to create deeply personalised offerings hinges on making sense of aggregated data and processing it quickly to determine individual outcomes. Personalisation and digitisation go hand in hand and those lenders that make that leap will be able to hardwire both responsible lending and innovation into their operations, resulting in the delivery of standout products to the market.