Says BNPL regulation will level the playing field and close credit score “blind spot”
Digital lender and non-bank challenger MONEYME (ASX: MME) has officially launched a new credit score product that has already seen over 37,000 new customers swarming to discover their score during a Beta Trial, despite zero marketing of the product so far.
The MONEYME Credit Score product is available through the MONEYME app, leverages credit file data from multinational credit reporting company Experian, and was built on MONEYME’s proprietary technology platform, Horizon.
It allows users to check their credit score for free (without affecting the score), see what’s on their credit file and how it’s impacting their score, view how their score is changing over time, and understand their approval chances on MONEYME’s credit products.
Its launch follows a Treasury options paper proposing that buy now pay later (BNPL) products become part of the credit reporting regime, which MONEYME sees as being positive for lenders and borrowers alike.
MONEYME CEO & MD Clayton Howes
According to MONEYME, the increased transparency would enhance responsible lending practices and the accuracy of credit assessments and close the credit reporting “blind spot” created by omitting BNPL, and help to level the playing field in the industry.
However, MONEYME is also urging BNPL users with multiple accounts to learn how BNPL may impact their credit scores if it becomes part of the credit reporting regime as proposed in Treasury’s options paper.
Clayton Howes, MONEYME’s CEO and Managing Director said:“We are strong believers in responsible lending and responsible borrowing, for the sake of both consumers and lenders alike. So we welcome the Federal Government’s intention to improve consumer credit regulation, and in particular the proposals that would see BNPL providers subjected to the same obligations as other lenders.
“Accurate and extensive credit reporting allows lenders to be more accurate in our credit decisioning and, in turn, helps to protect consumers. The limitation of BNPL data in credit reporting creates a blind spot for lenders and hinders us from getting a holistic view of a person’s indebtedness and their ability to meet repayments.
“Some of the changes proposed by Treasury would also level the playing field in the industry. Similar onboarding requirements to other credit products in the market would impact the ease at which consumers can access BNPL, which might see consumers shift away from BNPL and back to credit cards. With this advantage no longer in play, it would also make it less attractive for merchants to offer it at the point of sale, as credit card merchant fees are often a cheaper option.”
The current gap in credit reporting has also kept many Australian consumers in the dark when it comes to their true financial position according to MONEYME, with customer data demonstrating a significant crossover of the age group using BNPL the most, and the age group checking their credit scores the most.
There were 7 million active BNPL accounts in Australia reported by the Reserve Bank in the 2021-22 financial year, which is a 37 percent increase on the previous financial year.
The majority of these users were aged between 18 and 34 and averaged 16.6 BNPL transactions in a year, adding up to over $16 billion in transactions, while the majority (53 percent) of users of MONEYME’s new credit score service are also aged between 18 and 30 years.
Should BNPL become part of credit reporting, these consumers could see their BNPL balances and repayment history listed on their credit files. MONEYME is therefore suggesting BNPL users, and all Australian consumers, gain a solid understanding of how their financial habits may impact their credit score and ability to access future credit.
Clayton Howes said: “Given Treasury’s review of BNPL regulation, we’d love to see BNPL users – in particular those with multiple accounts – take some steps now to better understand how they can improve financial behaviours and also their credit score.
“The majority of BNPL users fall in an age group that is only now building up their credit profile, or who might be considering taking out a loan on a car or even entering the property market for the first time. We want this group to be in the best possible financial position when they apply for these loans.
“We are pleased to now offer a free credit score service to customers to help them get a better understanding of what impacts their credit score, and ultimately their ability to access credit in the future.”
Credit bureau Experian saw a 45 percent increase in consumers checking their Experian credit reports in the 12 months ending 31 Aug 2022, while credit enquiries across the entire 18 million Experian bureau population had also increased 5 percent in the same period.
This figure rises to 18 percent for customers also monitoring their credit report, which could suggest customers actively checking their credit score are more likely to apply for a credit product.
A survey sent to MONEYME’s beta product customers revealed that 94 percent found it helpful to know their score and understand how to improve it, while 40 percent found it “extremely” helpful.
The vast majority (93 percent) said they checked their score at least every few months and did so because they wanted to apply for a loan (31 percent), were worried about their debt (24 percent), or wanted to know how they compared to others (17 percent).
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About MONEYME
MONEYME is a leading Australian disruptor, using technology to become the #1 challenger to the major banks.
With a focus on innovation, it funds credit approved ambitious people with the advantage of market-leading speed and automated customer experiences. Leveraging AI and advanced cloud-based technology, it offers highly automated credit products across personal, auto and real estate finance.
The Group’s core brands MONEYME and SocietyOne reflect digital-first experiences that meet, and exceed, the expectations of ‘Generation Now’.
MONEYME Limited is listed on the ASX and the Group includes licensed and regulated credit and financial services providers operating in Australia.
For more information, visit moneyme.com.au or investors.moneyme.com.au
