Businessman looking at laptop display at workplace
Oct 2022 | Credit Decisions | Credit risk

The pandemic and its after-effects have fuelled dramatic changes in UK employment

The Office for National Statistics (ONS)[1] recently reported a reduction in UK unemployment to 3.5%.

Although more people are employed, we have the spectra of rising inflation to cope with. Costs on household essentials such as food, fuel, and utilities are rising. More consumers are feeling the squeeze, and in the face of increased financial stress more are likely to turn to credit to help manage their finances. Indeed, the bank of England has reported:

  • A 34% increase in gross consumer lending since January 2021
  • Credit card balances have increased month-on-month since April 2021
  • Household mortgage debt is growing, reaching £1,556.5 trillion in November 2021

Accessing a real-time view of an applicant’s financial health to get affordability and creditworthiness decisions right is essential for lenders to remain competitive. With so much fluidity in the employment market, gathering current and accurate employment information is essential, but also harder.

After conducting consumer research with YouGov to assess consumer willingness to share payroll data, as well as identifying the thinking behind their decision, and any areas of concern that could limit the adoption of this innovation we think we may have the answer:

Download the report now >

What’s the answer?

Access to real-time employment information sourced directly from an employee’s payroll – with their consent – provides a quick and easy method of accurately verifying an individual’s income. It also provides an opportunity to approve customers who previously might have been refused credit because of their limited credit history or transient working life.

Why is it so important to get your credit risk and affordability decisions right?

Regulatory pressure: Regulators have seen a notable rise in new unaffordable lending complaints, with 57,541 lodged in the year 2020/21 (up 54% on 2019/20).  Lenders are charged £750 per complaint, regardless of the ruling. Lenders need to ensure they’re using correct and timely data to understand affordability, reduce costs and avoid reputational risks from complaints.

Defaults: With households facing higher costs and rising interest rates, there’s likely to be more defaults in 2022 [Atradius].  Lenders need to get credit decisions right not only for their customers but to reduce their exposure to defaults.

Competitive market: In the current competitive landscape, lenders can’t afford to turn away credit worthy applicants. Opportunities exist with new forms of data such as real-time access to payroll data that can help lenders make better informed decisions and grow without increasing risk.

The Power of the Payslip

Existing methods for verifying income and employment involve collecting paper or PDF versions of payslips.  This manual collection of data is time consuming, resource intensive and open to fraud.  Applicants can pick and choose which payslips to share, share false documents and the data exchange is not secure or real-time.  This traditional journey includes lots of friction and can often lead to a poor customer experience and high numbers of customers dropping out of an application.

With so much change in UK employment, the UK economy, and increased demand from consumers for a seamless digital experience (88% of UK adults said online is their preferred method of application[2]) is manual collection of payslips the best method of verification?

Read our guide for lenders: Using employment data to grow your portfolio

Download now

Introducing Work Report

Automated access to verified income and employment data with a consumer’s consent offers a new and exciting opportunity for lenders to accurately understand affordability in real time.  Evidence from the USA where the automated sharing of payslip data has been taking place for over 30 years shows that access to verified income and employment information is proven to enhance the quality of lending decisions.

Experian’s Work Report now brings this service to the UK. It delivers verified income and employment information instantly from an employee’s payroll in seconds. It’s designed to automate the exchange of payroll information securely with a consumer’s consent, to streamline the application process and provide a more accurate information for credit decisions.

Most importantly, it has the potential to allow under-served customers, such as ‘thin-files’ or those with multiple jobs or short-term contracts to share accurate information on their source of income directly from their employer.

Work Report provides instant access to verified gross income, employment tenure, employer name and industry sector. Using it, lenders can view 3-months of granular payroll data and 12-months of rolling net/ gross pay.

  • Access verified data on employment status and source of income
  • Source payroll data directly from an employer’s payroll and eliminate fraudulent payslips
  • Accept applicants you may otherwise have declined by providing greater assurance on their employment status and source of income
  • Save time and resource in collecting and verifying payroll data. Improve the speed and accuracy of your lending decisions
  • Deliver a better customer experience

Want to know more?

Download the full research report to explore the value of digital income and employment data.

Get in touch to see how we can help access new customers and grow your business with verified digital income and employment information.

Previous chapter: Consumers are willing to share payroll details online for quicker access to credit

Next chapter: How to stay ahead in the mortgage market by saying goodbye to payslips

Sources

[1] Unemployment, Office for National Statistics (ONS)
[2] YouGov & Experian research of 1500 employed UK adults. June 2021