Striking a balance between adopting technology and managing credit risk


When applying for any financial transaction, we want it to be a quick and easy and for the process to be simple and straightforward.

Balancing Risk and Reward

At Skipton, we continue to improve our mortgage customer journey by adopting new technology to automate processes and decisions. In the Credit Risk team, we’re an important part of a Society-wide team which is making this happen, but it isn’t always quite as straightforward as collecting some new data or removing some existing controls in the process.

Some items are required to comply with regulation and others are important controls that allow us to maintain a high quality of lending in line with our appetite for risk.

Additional data is great to offer more consistency when it comes to lending decisions but makes the journey longer and potentially more complex. We need to consider connections to sourcing systems and/or aggregators and whether they ask certain questions as part of the mortgage application. For some application questions, external data sources offer an option, but there is cost to buy and implement, so it’s not easy to get the perfect solution.

Ultimately in Credit Risk, whatever we choose to do, our intention is to ensure our risk management controls allow Skipton to lend responsibly and protect our savers’ money.

Process Improvements at Skipton

We have a real focus on keeping the customer journey at the forefront of colleagues’ minds at Skipton, even those who aren’t on the front-line. Whenever we want to introduce, amend or remove anything from Lending Policy, the Affordability Model, Scorecards or application questions, we determine the impact on the customer and broker whilst assessing the risk mitigants. Here are some changes that we’ve made in the past year:

Implementing Automated Income Verification (AIV) allows verification of a customer’s income without the submission of payslips or bank statements. Obviously, we need to be comfortable with this approach from a regulatory and advice perspective, but it saves time uploading multiple documents then waiting for an underwriter to review them. In turn, our underwriters wouldn’t have to spend time assessing them and potentially changing the lending decision.

We regularly review our system rules and look to automate processes. One example was automating the BTL tax status (predominantly for basic rate tax payers) in our decisioning which internally saved 36 hours a month but also provides an instant decision as opposed to waiting a couple of hours for a manual underwrite.

Also worthy of a mention are the increased use of Automated Valuation Models (AVMs) and Desktop valuations to reduce the turnaround time, as it reduces the need for a physical valuation. And, the ability to validate ID and address verification without the need for you to submit copies of them to us.

We also strive to ensure that our affordability model is penny perfect throughout the journey, from our standalone calculator to submission of the application – provided that the data is input the same of course!

The best risk control solutions can be implemented accurately and consistently. At Skipton and in Credit Risk team, and at Skipton as a whole, we pride ourselves on the consistency of our mortgage journey, which helps minimise the chance of the decision changing late in the process.

The Future

So, what next?

Open Banking and Open Finance are exciting prospects which offer potential for greater insight of customer bank account conduct. In an effective mortgage lending process, this can automate the affordability assessment and verify income, and potentially the source of deposit. But it is not without challenges; such as encouraging customer adoption and how the data is shared between the customer, broker and lender.

Customer adoption will improve, it just takes time to become commonplace. At the start of 2021 over three million UK consumers and businesses were using Open Banking enabled products and with almost 0.7bn requests per month.

Some collaboration is already underway between brokers and lenders to explore how data can be shared and the number of use cases in unsecured lending in increasing, so given time this can become an integral part of an automated new mortgage process.

Exciting times, especially since this is just one example being considered for the future where technology and data could be leveraged to manage risk and offer process and customer journey improvements.

Peter Shuttleworth

Decisions Systems Manager, Skipton Building Society

Aidan Walker

Credit Risk Manager, Skipton Building Society

These views are Peter Shuttleworth and Aidan Walker’s own.

All information correct at time of publish.

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