Oakam is a UK-based digital micro-lender that provides straightforward, simple credit products to consumers who find it difficult to borrow from banks due to poor or no credit history. Since 2006, Oakam has used the growing accessibility and analytical power of smartphone technology to disrupt the UK’s antiquated, opaque micro-lending industry, making credit cheaper, fairer and more accessible for the country’s 12 million overlooked consumers. Oakam’s mobile-first approach has enabled the micro-lender to capture, interpret and use alternative data in credit scoring, underwriting, risk management and customer engagement, to bring more people into the formal financial system and on the path to prosperity. Today, Oakam has provided over 420,000 loans totalling over £320 million to consumers overlooked by mainstream financial institutions.


When the predominant model of credit scoring does not work or enable credit access for a large percentage of the global adult population, the conclusion must be that it is broken. While 2 billion adults do not have a bank account today, 85% of the world’s population own mobile phones. Oakam is using the growing accessibility and computing power of mobile technology to create credit scores for the ‘unscorables’ and open up credit access to overlooked consumers. Its innovative use of alternative data, psychometrics and behavioural nudges, and mobile-first delivery has enabled Oakam to overcome the unique risk, delivery and design challenges of serving this market in a sustainable and scalable way. With a solid track record of growth and measurable positive financial outcomes for customers in the UK, Oakam has clear potential to expand its impact on inclusion on an even larger scale. Tapping into the boundless potential of mobile technology Until recently, fintech disruption in lending has bypassed the world’s poorest communities who lack access to credit, but recent leaps in mobile phone penetration globally - today 85% of the global population owns one - presents innovative microlenders with the opportunity to overcome the barriers to lending to the underbanked and unbanked. Traditional players in the £1.8 trillion (circa $24.9 trillion) global micro-lending sector have made the cost of credit astronomical for the poor, because of their analog models and reliance on large network of doorstep loan agents. In fact, industry cost-to-income ratios average 50% contributing to the ‘poverty premium’ the poor pay for access to financial services. Oakam is using the potential of mobile to lower this poverty premium and put consumers on the path to prosperity. In addition to the savings passed on to consumers through Oakam’s lower operating overheads model, mobile presents a number of other key advantages in driving inclusion. It is estimated that about £3 bn of additional costs facing borrowers in the UK’s microcredit sector stands to be eliminated by moving to digital models. Alternative data: a new framework for inclusive, accurate credit scoring, underwriting and risk management Data from FICO shows that 60-75% of traditionally un-scorable consumers could be assigned a more meaningful credit score using alternative data. Oakam has proved the validity of this data, and by supplementing traditional methods of underwriting, such as the analysis of credit bureau data, with alternative approaches (i.e. unstructured data from online conversations, social network associations/social vouching, psychometrics) the micro-lender has been able to assign a credit score and evaluate a high volume of applicants - including those with little or no credit history. In fact, to date loan application levels have grown by 300 percent from 2017 and Oakam has disbursed £320 million to help financially excluded consumers gain access to credit. A study of 15,000 first-time Oakam customers between January 2015 and July 2016 proved that this approach works: 70% of new customers made on-time repayments, despite previous challenges accessing credit due to their income levels; court judgements on prior loan defaults; status as a new resident of the UK; the absence of credit history or low credit scores; or some combination thereof. Oakam believes that credit access is only half the battle in driving financial inclusion. The other half is helping vulnerable consumers to develop and maintain healthy financial habits, such as managing credit, building savings and budgeting well, that will help them build financial resilience and greater financial prosperity. Oakam addresses this through their mobile app, which offers borrowers an engaging and rewarding way to manage their credit and build good habits. The advantage of Oakam’s mobile-first is the access it provides to real-time behavioural data from customers, which is used to ‘nudge’ borrowers at the right moments towards good financial decisions. This concept of nudging in built into Oakam’s gamified in-app rewards journey, Oakam Grow where borrowers are rewarded for on-time loan repayments and other positive actions like regular app engagement, with store vouchers and interest rate reductions on future loans. Effectively, the borrower can manage down their own ‘risk’ and therefore lower the cost of credit through their own actions as well. Some positive behavioral outcomes include: 25% improvement in on-time loan repayment since the launch of Oakam Grow in April 2017 33,300 customers have registered on Oakam Grow, a feature on Oakam’s mobile app, and to date have earned more than 8.1 million points Customers can lower rates by up to 51% with Oakam Grow 50% increase in regular engagement with the app (2+ visits a month) since the launch of Oakam Grow Only 3% of customers who were offered the chance to redeem their points at the earliest option did so, suggesting that consumers use these rewards as ‘deferred savings’ that will have a higher value in the future. I.e. building positive financial habits Technology should enhance not replace the human touch While Oakam is mobile-first, it’s digital strategy is complemented by its retail presence in its customers’ communities. Oakam has found that human evaluation of loan candidates is highly effective in assessing risk, while the in-person education and support ensure that customers fully understand their loan and how they can earn rewards/lower rates through the mobile app. Fluent in over 20+ languages, Oakam’s in-store and remote representatives help customers feel heard, understood and dignified. Accion, a leading non-profit that has supported and funded global efforts to build an inclusive financial ecosystem, recently used Oakam’s model as a leading example of why digital models need to be complemented by physical presence to ensure inclusive finance: http://bit.ly/2GVW3XX Other ways in which Oakam is accelerating financial inclusion and expanding access to fair, affordable, transparent credit: Scaling psychometric testing: Oakam’s work with City University is exploring how to digitize psychometric testing, enabling more accurate and inclusive character-based credit underwriting. Inclusion through social vouching: Oakam’s refer a friend program allows existing customers to socially vouch for their friends and families, giving them a leg up into the credit system. This is especially beneficial for the migrant community, who are without a credit footprint, or individuals who have faced challenges accessing credit previously. Metrics show that borrowers within social networks perform better and referees can also earn lower rates by bringing friends into Oakam’s network. Using the growing accessibility and computational power of mobile phones, Oakam is overcoming the risk, last-mile delivery and design challenges of lending to ‘credit invisible’ consumers, even in the developing world. The rich footprint of alternative data these devices generate has enabled Oakam to create a more inclusive credit scoring system, eliminating a significant barrier to broader financial access. Oakam’s diverse, globally-experienced team and agile, mobile-first model offers a scalable solution to financial inclusion that can be deployed in new, heterogeneous markets.

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