Overview

Our Affordability product empowers businesses to determine how much an end user can afford to pay per month by analyzing their income and spending patterns. By leveraging real-time Open Banking data or customer-provided transaction data, we provide a reliable estimate of affordability. This enables faster, data-driven lending decisions, improved risk management, and enhanced customer experience—all while promoting responsible financial practices.

Affordability can be used in two ways:

• Open Banking Journey: The end user connects their bank account via Open Banking, and we retrieve the necessary data.
• Affordability Engine: Customers feed their own transaction data into the API for processing, bypassing the Open Banking journey.

Challenges We Help Address

• Making instant, accurate lending decisions with Open Banking data
• Reducing reliance on end users to self-report financial commitments
• Detecting inaccurate or misleading income and expense information
• Accelerating collections and recoveries with better repayment estimates
• Avoiding administrative delays in identifying loans and debts on credit reports
• Replacing paper-based processes with automated, real-time insights

By combining income analysis and expense categorization, our Affordability product ensures smarter lending decisions, reduces risk, and enhances operational efficiency.

How It Works

Types of Spending

Categorizing spending is essential for calculating affordability. Our Affordability product uses the Standard Financial Statement (SFS), a standardized tool for listing incomes and expenses. Spending is divided into three main categories:

1. Fixed Costs: Essential, non-discretionary expenses that occur regularly (e.g., rent, loan payments).

   • Example: Fuel

   • SFS General Category: Transport and travel

   • SFS Specific Category: Fuel, parking, and toll road charges

2. Flexible Costs: Discretionary spending that varies and reflects lifestyle choices (e.g., gym memberships, entertainment).

   • Example: Clothing

   • SFS General Category: Personal costs

   • SFS Specific Category: Clothing and footwear

3. Debt Fees: Payments on unpaid debts passed to collection agencies. Unlike regular loan payments (which are fixed costs), these are treated separately as they indicate financial distress.

Calculating Affordability

Our affordability calculation follows a step-by-step process to ensure accuracy and consistency:

1. Obtain Data:

   We receive transaction data for analysis. Customers can either allow us to retrieve bank transactions via Connect or provide their own data.

2. Categorize Transactions:

   Our Categorization Service assigns each transaction to one of 81 categories, which are then grouped into SFS categories: fixed costs, flexible costs, and debt fees.

3. Calculate Income:

   Our Income Verification Service identifies the end user’s recurring income streams and determines their monthly income.

4. Calculate Spending:

   We calculate the average monthly amounts for fixed costs, flexible costs, and debt fees.

5. Calculate Affordability:

   Affordability is calculated as the difference between the end user’s monthly income and their total spending.

6. Return Data:

   The final results are returned to the customer, enabling them to assess the end user’s financial situation and make informed lending decisions.

Key Data Provided

For every calculation, we provide the following insights:

• Income: A calculated income figure derived from raw bank data and validated by our Income Verification service.
• Spending: Detailed spending data grouped into Fixed Costs, Flexible Costs, and Debt Fees based on Standard Financial Statement categories.
• Affordability: An estimated affordability figure representing the difference between income and spending.

API Response Fields

The API provides essential insights into an end user’s financial profile, including:

• Monthly Affordabilities: Up to 365 days of transaction data analyzed and broken down month by month:

  • month1: The earliest month in the dataset
  • month11: The most recent month
  • calculatedIncome: Estimated income per month
  • fixedCosts: Fixed costs per month
  • flexibleCosts: Flexible costs per month
  • debtFees: Debt fees per month
  • affordability: Affordability estimate per month

• Aggregated View: Holistic insights based on the entire dataset, including:

  • estimatedCalculatedIncome: Calculated Income Estimate based on whole period.
  • estimatedFixedCosts: Calculated Fixed Cost Estimate based on whole period.
  • estimatedFlexibleCosts: Calculated Flexible Costs Estimate based on whole period.
  • estimatedDebtFees: Calculated Debt Fees Estimate based on whole period. estimatedAffordability: Calculated Affordability Estimate based on whole period.
  • avgEstimatedAffordability: Average Affordability Estimate based on whole period.
  • avgCalculatedIncome: Average Calculated Income based on whole period.

Additionally, the service returns an affordabilityTransactions schema, which includes all transactions and specifies whether each is a credit or debit, categorized as Fixed, Flexible, Debt Fees, or Savings.

API Schema and Response

• Affordability API
• Affordability Engine

Configurability

Our Affordability product offers comprehensive configurability to meet different business needs:

• Selecting the Main Income Stream: With multiple income streams (salary, child tax, transfers), this configuration ensures only the primary income source is selected.
• Consecutive Income Months: Income streams must show consistent income for a set number of consecutive months; missing income in any month disqualifies the stream.
• Exclude Benefits: Option to exclude benefit-driven income streams from affordability calculations, while still showing them in income verification. The state pension is not classified as a benefit.
• Deduct Flexible Costs: Remove or reduce a percentage of flexible costs from income.
• Prioritize Salary Income: Focus on income streams categorized as salary (e.g., wage, payroll, salary).
• Custom Category Mapping: Customize expenditure categorization to define what qualifies as fixed or flexible costs based on specific business needs.

Use Cases

• Lending Decision Support

  Make real-time, data-driven lending decisions by assessing an end user’s income and spending patterns.

• Fraud Detection & Prevention

  Detect inconsistencies in reported income and spending to reduce fraudulent loan applications.

• Collections & Recoveries

  Improve recovery strategies by identifying realistic repayment amounts and prioritizing high-risk cases.

• Regulatory Compliance & KYC

  Support KYC and AML procedures by verifying income and spending data.

Key Benefits

• Accurate Affordability Assessments: Powered by real-time transaction data and intelligent categorization.
• Enhanced Lending Decisions: Make smarter, faster decisions with reliable data insights.
• Improved Risk Management: Minimize exposure to bad debt through detailed affordability analysis.
• Customizable & Flexible: Tailor affordability assessments to align with your business model and risk appetite.
• Seamless Integration: Easy-to-use API with structured, scalable responses.