Digital creditworthiness assessment: stricter regulation, more complicated process?

Abstract

In the digital environment the access to credit is becoming easier and faster, and therefore more dangerous. Lenders are obliged to perform creditworthiness assessment before granting credit, but over-indebtedness still exists in the European financial market. The new EU Consumer Credit Directive reinforces the importance of creditworthiness assessment, but regulation is still unlikely to be uniform across all Member States. In addition, the financial environment is constantly changing: after open banking, new open finance ecosystem is now being built, allowing financial data to be shared not only between banks but also between different financial service providers. Under open finance, customers' financial data will be made available to third parties if the customer gives their consent. This will allow financial service providers to offer personalised services based on more accurate and detailed information, and creditworthiness assessment and scoring will be transformed: credit scoring modelling based on customers' banking transactions will be possible in the future, instead of or in addition to the information that has been available so far. The EU's new draft regulation on a framework for Financial Data Access will give consumers the choice of whether to share their data with their financial service provider. The question rightly arises as to whether consumers will be able to see the consequences of this choice.