Improved affordability assessments with Expense Check

5 min read|Published August 31, 2022
Improved affordability assessments with Expense Check

In the current macroeconomic environment, many consumers are struggling to repay their loans. In light of this, the need for lenders to accurately assess applicants’ affordability is greater than ever. With Tink’s Expense Check, lenders can upgrade their underwriting process and check an applicant’s creditworthiness in a matter of minutes.

TL;DR – Quick summary
  • In today’s economic climate, it’s vital for lenders to be able to accurately assess applicant affordability.

  • With Tink’s new product Expense Check, lenders can gain access to the applicants’ spending data in a matter of minutes.

  • With this, lenders can assess affordability in a safer, more accurate way – leading to higher conversion, reduced fraud, and a more inclusive financial landscape.

TL;DR – Quick summary
  • In today’s economic climate, it’s vital for lenders to be able to accurately assess applicant affordability.

  • With Tink’s new product Expense Check, lenders can gain access to the applicants’ spending data in a matter of minutes.

  • With this, lenders can assess affordability in a safer, more accurate way – leading to higher conversion, reduced fraud, and a more inclusive financial landscape.

Affordability assessments are a central part of a lender’s loan origination process. It’s where they determine whether or not the applicant can afford to repay the loan.

A lender will typically start by assessing the financial circumstances of the applicants. There are a variety of criteria and methods used based on the size, collateral, and type of loans. With most types of loans, validating the income and expenditures is an important first step of assessing an applicant’s creditworthiness. 

Tink’s Income Check makes it possible for lenders to verify the applicant’s income in a matter of minutes. With our new product Expense Check it’s now equally straightforward to identify and evaluate an applicant’s expenditures. With these products, assessing affordability has never been easier.

Comprehensive affordability checks with open banking

Traditionally, affordability assessments are based on user-provided inputs or basic statistical estimates of a person's spending, combined with data from many different sources – creating friction and misguided conclusions on affordability.

Tink’s new product offers a seamless way of validating customer affordability at the time of application, by reviewing regular expenditures from a taxonomy designed specifically to support the EBA requirements on tighter affordability assessments.

What it means for lenders

  • Improve regulatory compliance: Review regular expenditures from a taxonomy designed specifically to support the EBA and local requirements on tighter affordability assessments.

  • Reduce fraud: Use real-time, accurate data authenticated by the applicant instead of manual submission of paperwork.

  • Improve UX: Simplify application process with pre-filled fields on the expenses instead of manual input from the applicants.

  • Increase conversion: Increase applications with streamlined application process

  • Build a solid portfolio: Get a granular set of data to feed into your affordability analysis and develop a solid portfolio.

What it means for borrowers

  • Shorter time to money: Automated, faster loan application instead of filling out lengthy forms and dealing with additional paperwork.

  • Financial inclusion: Affordability calculations can now be based on actual expense flows instead of basic statistical estimates of a person's spending. As a result, the repayment capacity buffer is determined more accurately.

  • Safer lending: Better affordability assessments prevent consumers from borrowing money they can’t afford to pay back.

How it works

Expense Check analyses the expenditure data and delivers it to you through our API, enabling you to assess the applicant’s affordability in minutes instead of hours or even days. You can embed it seamlessly into the loan application flow. If you’re already using Income Check, Expense Check can be part of the same flow. 

Once the applicant chooses the specifications of the loan and hits the apply button, they’re directed to the authentication step where they select and authenticate with their bank. From there, Expense Check fetches the raw transaction data, assesses the outgoing cash flows and segments them into their corresponding category.

This means you can identify and assess expenditures of the applicants in relation to affordability, which includes categories such as:

  • Housing costs (rent, property tax)

  • Loan payments (mortgage payments, interest, amortisation) 

  • Utilities (electricity, heating, water)

  • Transportation costs (fuel, leasing, public transport)

  • Insurance (vehicle, property)

Expense Check is designed to give lenders access to real-time data so that you can rely on current, up-to-date information, rather than outdated traditional methods where expenses are calculated by probability (size of family, type of housing etc.) rather than live data. 

Want to get down to business?

Open banking is powering the future of lending. Whether you’re a bank aiming to have stronger loan portfolios and provide a better customer experience, or a digital lender looking to streamline your affordability analysis, we’re happy to help – just get in touch.

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