Redesigning the future of consumer lending with data and analytics

Companies that can tailor the digital customer journey to improve the consumer experience will win in a more digital world

It is well documented that the pandemic has sped up the digital transformation of the economy - both in the UK and globally. Many more economic sectors are digitising and the amount of data being integrated into the building blocks of business is the highest it has been. The digital customer experience, enabled by both data and analytics, is therefore the new battleground for many industries.

This has been fuelled by the rise in online activity among global consumers, with consumers reporting they were online 25% more in 2021 compared to a year ago, according to Experian, and this number holding up in 2022. At the same time there are heightened expectations not just around security, privacy and convenience, but also personalised services. Digital natives are raising the bar in this regard with a zero tolerance for poor service. Today, revenue growth depends on companies delivering on consumer expectations.

“The good thing is that technology and data now allow businesses to put the customer journey at the heart of what they’re doing. With the advanced technologies available today, businesses can access relevant data and deliver on customer expectations in their moment of need. Whether it’s access to a loan or mortgage, or to consolidate debts, a real-time view of the consumer is possible,” says Steve Wagner, global managing director for decision analytics at information services company Experian.

“The market is driven by consumer demand for digital services. Those companies that are able to tailor the digital customer journey so it reflects the best-in-class consumer experience are the ones that will win.”

The application of advanced analytics, artificial intelligence and machine learning is allowing businesses to tailor their services to an audience of one at scale. This is particularly prevalent in financial services. Underwriting processes and accurate fraud detection can all be accessed in real time, while the customer experience and credit risk analyses coexist seamlessly.

The application of advanced analytics, artificial intelligence and machine learning is allowing businesses to tailor their services to an audience of one at scale

This is essential since the global pandemic has eliminated large swathes of physical cash transactions. Research from Experian found that online retail sales saw four years of growth in just 12 months during the Covid pandemic. This has dialled up the need for businesses to improve how they recognise their customers and provide secure digital transactions.

“The future involves asking customers to do less without sacrificing the security, convenience and privacy of their online experience. Reliance on physical forms of ID to access services has been replaced by the demand to identify online for a frictionless journey. Whether that’s through biometrics or multimodal authentication, customers can see the value exchange in sharing personal data,” says Wagner.

Behavioural biometrics is the next frontier in tackling fraud and providing a seamless customer journey. Rather than relying on the initial customer authentication, the behaviour of the user is tracked for suspicious activity. Passive, continuous activity monitoring can flag if it isn’t the customer due to abnormal behaviour.

“The way in which a person types a password is unique, so is the way they press on a mobile screen. By monitoring those behaviours using advanced analytics, businesses can verify customers without disrupting the experience and therefore keep fraudsters at bay,” says Wagner.

“Technology is allowing us to analyse far more data sources in real time, providing a comprehensive picture of an individual. Therefore, every business model should be focused on customer-centricity, with a better understanding of customer needs and experiences.”

Open Banking in the UK, which involves the democratisation of data, is assisting in this process. Customer data is key, yet its value lies in being able to extract the insight lenders and fintech providers need to implement the best customer journey and make the best decisions, often in seconds.

Consumers are more likely to share their personal data if it improves their experience. Open-source data can empower businesses and consumers alike. Smaller businesses with historically limited data can now build a view of potential customers, expanding portfolios and minimising credit risk, bringing more people into mainstream financial services with products that are suitable for their circumstances.

“The future is where customers are more in charge of their own data. This is why we launched Experian Boost globally and then Experian Go in the US. This allows consumers with limited credit histories to build out their credit report, using transactions not typically included, from rent payments to streaming subscriptions,” says Wagner.

Most businesses already collect data in some way but just storing it is not enough. The data must be classified, analysed and processed to produce real insight.

“It’s this insight and increased understanding of customers and opportunities that will lead to better decision making within businesses,” says Jonathan Westley, chief data officer for the UK and EMEA at Experian.

Businesses can do this by making credit-risk decisions using automation and advanced analytics. This will lead to more opportunities for credit and thus better financial inclusion, particularly for low-income and marginalised communities. The cost-of-living crisis in the UK is likely to highlight the need for more financial inclusion. Data and analytics are at the heart of this process.

“Another frontier is a term called ‘insight everywhere.’ We live in an omnichannel world where customers interact with chatbots, virtual assistants, call centres or in a physical store. Businesses want access to that knowledge about a customer to provide them with a better service,” says Wagner.

“This is where we will continue to innovate. Experian is in a unique position because we empower companies with data, analytics and technology, help them calculate risk and empower them to make the right decisions for their business and their customers. The broader market pays a price if it makes the wrong decisions. With the right decisions, business wins, the market wins and the consumer wins. This is what matters.”

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