Tell us more about Aire! What makes your company and your vision unique? What is the main customer need that Aire wants to address?
Access to credit underpins so many of our life choices: renting a car, training, buying a house – all of this depends on credit. Unfortunately, as our way of life becomes more complex (multiple income streams, frequent job changes, relocations), the ability of the traditional credit bureau to keep up with us is diminishing. This is not the fault of the consumer, but rather the failure of an outdated credit system – a system that we at Aire are working hard to update.
The solution lies in the individual context of each consumer. For this purpose, we work directly to understand the financial situation in real time and present this data to lenders as actionable insights, seamlessly and to scale. This benefits everyone – they fill in the gaps that were only created by historical office data, in order to give lenders more decision-making powers in order to evaluate their customers fairly.
But this is also a personal mission. When I moved to the UK from the United States in my twenties, I was “invisible” to the British credit system, even though I had a good job. Making access to credit equitable is a difficult problem to solve, but it is so important – done right, it will benefit millions, if not billions, of consumers around the world.
Where’s Aire on his trip? What were some of the most important milestones and challenges on the way there?
Established in 2014, we are only the fourth UK organization to be approved by the FCA as a credit reference agency by 2016. Despite this official seal of approval, this is not an easy problem to solve.
Our early years were devoted to developing and refining our new approach to credit risk and affordability. Since then, we’ve been working with a handful of innovative lenders – our early adopters – to prove that it works. For example, working with one of the UK’s largest digital lenders, N Brown, in terms of affordability has helped us prepare for the mainstream market. We also worked with Toyota Financial Services on collections. We started in the US last year.
Most importantly, we respond quickly to the real-time needs of lenders. According to COVID-19, we help them understand their customers’ financial situation in real time, thereby proving Aire’s acute validity in a rapidly changing world.
The established lenders are often skeptical about the relevance of alternative data when assessing credit risk. How did you master this challenge when dealing with lenders?
Aire is not about replacing the traditional credit bureau model. In fact, we see great value for lenders in this. However, evaluating consumers based on historical data only leads to gaps in understanding their real-time situation.
By integrating with the lender’s existing decision-making processes, Aire adds insight instead of replacing it. We use advanced machine learning techniques to query this data and validate it against our existing models to give the lender meaningful insight – an insight that directly influences decision making. This combination, achieved through a seamless user experience, delivered on a large scale and in real time, makes our offer unique.
The feedback from the lenders was positive, because ultimately it is not just about sending money, but also ensuring that it comes back. Aire is at the heart of this relationship – it keeps the consumer represented and the lender up to date.
Different credit products require different approaches to assessing credit risk. What types of data does Aire use in its credit rating models? What types of loans is Aire’s solution best for?
Our work focuses on data from first-party providers, ie information that is collected directly from the consumer. This enables us to work across the entire customer lifecycle. Through our interactive virtual interview (IVI), a digital conversation that can be widely distributed to a lender’s customer base, we collect a series of inputs that reflect a consumer’s current financial situation, professional position, accommodation status, and attitudes to make up life and work. In combination, these factors provide a solid indication of a customer’s ability to borrow. During the acquisition, we have demonstrably increased the credit acceptance rate by 12 to 14% without increasing a lender’s risk appetite.
When it comes to customer management and debt collection, we help lenders assess customers’ leeway to continue borrowing by identifying the risk of financial hardship and validated knowledge of disposable income, and providing real-time information about changes in their circumstances that provide insight give how the lender deals with them.
How customer data is evaluated in credit rating systems often remains a mystery. Could you shed some light on how your algorithms convert different customer behaviors into credit information?
We never tried to rewrite the credit rules. Instead, we offer lenders sharper tools to make more informed credit decisions. And there are two basic questions for lenders. First, will the borrower pay back the money he borrowed? Second, can they afford to meet these commitments? At Aire, we use additional real-time data to answer the same questions.
Our interactive virtual interview begins the process of understanding the consumer. A completely dynamic process that runs over a million potential routes. Our machine learning algorithms then validate the responses to accuracy and apply weights to each input to provide actionable insights to the lender. These algorithms have been developed over several years by data scientists and manual underwriter experts to ensure that they are as predictive and accurate as possible and are systematically analyzed before use.
While Aire is currently focusing on financially highly developed markets such as the UK and the USA, are your credit rating solutions also applicable in developing markets? How do needs and requirements differ in both worlds?
Aire was not only built to solve a British problem – we see ourselves as globally accessible. But you have to be patient and attentive as you expand. Aire has made a strategic decision to focus on the UK and US as both are established credit markets with adequate levels of consumer protection and relatively similar regulatory systems. These are also markets where consumer credit providers like to use additional data sources to make their credit decisions. This has opened up massively in the United States in the past six months.
However, Aire’s accuracy is so high that it can act as a standalone credit service in countries where lenders do not share data through a traditional credit bureau. In this sense, Aire has the potential to be global. As I often tell my team, we are built for the world in London.
How has the coronavirus pandemic affected Aire’s business? How did the company react to these new realities?
There is no doubt that the world is now facing one of the greatest humanitarian crises. With so much flow and for so much, traditional data only loses its relevance to lenders. We have already seen the volume and value of new consumer credit contracts decrease as consumers protect their finances and lenders try to manage default rates.
At Aire, this change reflects where we currently see the greatest interest from lenders. The need to mitigate existing customers’ risk is of paramount importance. Aire offers consumers the opportunity to present themselves and sudden changes in their financial situation, e.g. as vacation, sudden dismissal or reduction of working hours. However, we also help you with operational efficiency by designing manual processes such as addressing customers digitally and far more extensively through our interactive virtual interview. While no one would want such a disruption on the world stage, it’s reassuring that what Aire offers can really benefit both lenders and consumers in this challenging time.
What advice would you give to someone who is not convinced of the power of alternative credit rating data? How do you see the development of this space in the future?
The addition of additional data streams, e.g. B. First-party data collected directly from the consumer only serves a lender’s credit decision process. And if we really understand the consumer, lenders can begin to stay ahead of their problems – they’ll spot their problems faster and help them recover faster. The ability to convey a forward-looking picture of a consumer is really exciting, and that’s the potential we see in alternative data.
Basically, it’s just about becoming personal on a scale – and giving a more detailed insight to make credit decisions for the modern age. At Aire, we offer this digitally (through our interactive virtual interview) and on a large scale for lenders. The advantages of alternative data are simple: For every lender, the more knowledge they have about their customers, the more informed decisions can be made about their ability to take out loans fairly and without prejudice.
Founder and CEO
Aneesh Varma moved from New York to London in 2007 and was excluded from the credit system. Aneesh, a self-proclaimed third culture citizen who has lived in eleven countries, has worked for governments for six years to bring about change.
Aneesh was determined to bring about change from the inside. With the experience of some successful startups, he founded Aire in 2014 with the bold vision of making loans fair for everyone.
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