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Research Questions

  1. What are the key factors influencing change in the credit information market?
  2. What might plausible future scenarios for the credit information market in 2030 look like?
  3. What are the key, policy-relevant implications of these scenarios?

RAND Europe was commissioned by the Financial Conduct Authority to conduct a piece of forward-looking research to understand how the credit information market might evolve in the future. Using a structured scenario methodology and stakeholder consultation, this project identified the factors influencing change and developed four plausible future scenarios that provide insights into the implications for the credit information market, the lending markets, consumers and wider society.

Four plausible future scenarios were identified for 2030.

  1. Widening credit gap: Innovation in new data sources and advanced analytics has slowed, meaning credit information has not continued becoming cheaper and more consumers have little or no information held about them at the CRAs.
  2. Consumer-centric credit: Consumers are empowered to choose which data they share and with whom. Whilst lending decisions are, in general, better informed, the reliance on consumer-consented data presents challenges. Some individuals also pay a 'privacy premium'.
  3. Big data driven: CRAs have become more sophisticated in using Big Data and advanced analytics to provide insights to a diverse range of customers. However, as credit is increasingly offered on personalised terms, some higher-risk individuals face significantly higher costs and fewer options for credit.
  4. Lenders lead: Lenders have led the way in using credit information from a wider range of sources, generating greater competition. However, confusion from consumers over how their data is collected has led to an increased focus within industry on developing a code for data collection and use, including factors like ethics and transparency.

Key Findings

  • Competition and innovation in both the credit information and credit lending markets is a key driver in enabling lenders to access a wider variety of better-quality credit information at a lower cost.
  • The use of wider variety of data and more sophisticated analytical techniques in decision making should increase the overall quality of lending decisions, although products for some consumers may be more expensive.
  • Technology is both a key enabler and a potential barrier to development in the credit information market.

Recommendations

  • This project identified the factors influencing change and developed four plausible future scenarios for 2030 that provide insights into the implications for the credit information market, the lending markets, consumers and wider society.
  • RAND Europe was commissioned by the Financial Conduct Authority to conduct research to understand how the credit information market might evolve over the next ten years. Using a structured scenario methodology, this project identified the factors influencing change and developed four plausible future scenarios that provide insights into the implications for the credit information market, the lending markets, consumers and wider society.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Approach

  • Chapter Three

    Future scenarios for the credit information market

  • Chapter Four

    Broader implications

  • Annex A

    Methodological approach

  • Annex B

    Stakeholder Engagement

  • Annex C

    Glossary of terms

Research conducted by

The research described in this report was commissioned by the Financial Conduct Authority and conducted by RAND Europe.

This report is part of the RAND Corporation Research report series. RAND reports present research findings and objective analysis that address the challenges facing the public and private sectors. All RAND reports undergo rigorous peer review to ensure high standards for research quality and objectivity.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.