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Open banking and AI-powered Fintern raises £32M to increase affordable credit accessibility in the UK

Fintern founders
Image credits: Fintern

Getting a loan can be a hassle, but it doesn’t necessarily have to be that way. With startups such as Fintern, one can get credit with just a few taps. The London-based company uses a different approach for figuring out who is eligible for a loan, which it claims ensures more people get to take a credit when they need it. The company has now raised a notable £32 million in a new funding round, which will help expand its services. 

In a conversation with UKTN, the company’s CEO Gerald Chappell reveals more about the company’s plans, what it intends to do with the funding and more. 

Expanding eligibility 

Typical lenders rely on the credit score system to decide whether a loan can be disbursed or not. Fintern, on the other hand, makes a decision by employing Open Banking and AI to analyse their customer’s data. Users simply need to connect their bank account within their app, after which AI analyses their incomings and outgoings and pairs this info with their current debt obligations and repayment history, if relevant.

Fintern app

“This helps us understand the whole financial picture of each client, rather than just use a credit score.  This builds a view of a borrower’s real-time affordability for a loan, and to make responsible lending decisions.  We also share our analysis with customers, helping them understand their own financial capacity and how they can use this to optimally repay their debts,” Chappell adds. This ultimately helps expand the customers that can get a credit instantly.

Fintern currently offers loans of £500-£5,000 for durations of up to three years with a variable APR of 18.8%.

Further expansion

As for the latest funding, the London-based credit provider has secured £32m in equity and debt funding. The equity funding apparently comes from several fintech founders and business leaders while debt financing will be provided by Hamburg-based fintech financier Varengold Bank. 

The equity funding will be utilised to expand the team, kickstart marketing to prove their model. Currently, their team comprises 16 people, and they are looking for more talented people. 

The idea

Fintern was co-founded by the CEO Gerald Chappell and COO Dr. Michelle He. The duo worked together for many years. They were inspired to come up with the idea after experiencing the lacking affordable lending options available for people in the UK. Michelle was also stuck with lenders that are over-reliant on credit scores when she moved to the UK. Despite a good job, she didn’t have a credit history in the UK and thus, was unable to get a loan.  

“We were disappointed with how traditional lenders overly relied on behavioural credit scoring and saw there was a huge opportunity to use additional data sources such as Open Banking to build a more complete and fairer picture of borrowers’ financial circumstances,” Chappell adds. The startups’ reasoning stems from the fact that better understanding a person’s financial circumstances, Fintern could offer lower interest rates and its services to a much larger population. 

The audience and the challenges

Fifteen million Britishers that currently don’t have access to affordable loans are the company’s target audience. These people often resort to unsustainable means such as high-cost lenders, borrowing long-term on credit cards, or buy-now-pay-later schemes to manage their financial lives. “This includes people who have “thin” credit files (maybe they are new to the workforce or just moved to the UK) and people with historical, but now resolved, credit problems,” says Chappell. 

As for the problems and challenges, Fintern’s main issue is the traditional approach banks have towards personal lending. “While traditional behavioural credit scoring (the industry’s approach for credit decisioning) works well to separate the highest quality customers from the lowest, it performs poorly in differentiating risk among the majority of people,” notes Chappell. “Often the consumers hardest hit are those who have had historical blips in their credit records or, for example, those people who are new to credit or have moved countries.”

The company’s primary challenge was to build new credit technology that bypasses credit scores in making lending decisions, focusing instead on affordability and a customer’s financial intrinsics. “What we’re doing is new, so we need to educate our target audience about how what we’re doing is different and properly differentiate ourselves from the incumbents,” Chappell remarks.