Canada is getting a newcomer in the payday lending space, one that says it wants to shake up the consumer financing space with data analytics.
On Aug. 22, London-based payday lender Active Securities Ltd. announced it’d be entering Canada, setting up the Canadian branch of its 247Moneybox operations in Vancouver, B.C. While it uses the same business model as other payday loaners, what sets it apart from its homegrown competitors is that it relies on its risk engine to set loan conditions. That allows the company to account for more than a customer’s credit score, and it can give customers loans without increasing the default rate.
Active Securities Ltd., which is also headquartered in the U.K., operates 247Moneybox.
“Risk analytics are at the core of our business. Our decision engine allows us to make fast and accurate credit decisions, often within minutes of an application being made,” said Mark Hannay, COO of 247Moneybox, in a statement.
“We’ve developed a number of algorithms fed by multiple data streams, from on-site behavioural analytics, to traditional credit reference agencies, and social media feeds, so our risk score cards are highly adaptive and always up to date.”
While traditional factors that go into loan approval – like credit score, income, and repayment history – may work for traditional models of lending that are more long-term, those don’t necessarily apply to short-term finance, he added.
“Applying traditional underwriting techniques [to consumer credit] is like using a sledgehammer to crack a nut – it’s fundamentally the wrong tool,” Hannay said, adding 247Moneybox’s method of approving a loan is also faster than what traditional payday lenders can do.
Beyond bringing a unique risk analytics engine into Canada, Hannay said he feels it’s important for his company to stay open and transparent. That’s especially true, given public skepticism around payday lenders, he added.
“Responsible lending is another focal point across consumer credit now in the wake of the recent financial crisis and rightly so. We are always striving to make our service more open, honest and transparent,” he said.
“We’re aware of the perception of the industry and feel the only way to go about changing it is by setting a precedent and hope that others will follow.”