Speckle Financial Health partners with SparkBeyond to improve financial stress

  • By Anna Shaw

The partnership between Speckle and SparkBeyond was initiated to show how artificial intelligence could help Speckle identify vulnerable Australians through default rates and develop interventions to improve their financial resilience. RFi Group’s Anna Shaw reports. 

Speckle Financial Health was created with the vision of building a financially resilient Australia with affordable and ethical products and services.

Speckle is a not-for-profit small lender with the aim of reducing financial stress and putting customers in control of their money through a customer centric approach. 

Customers can take out loans between $200 and $2,000 without early payout fees and 100% of profits are reinvested into Speckle to enable future loans to be funded.

Speckle recently announced a partnership with SparkBeyond, an AI powered problem-solving platform that was started in Israel in 2013.

The partnership between Speckle and SparkBeyond was initiated to show how artificial intelligence could help Speckle identify vulnerable Australians through default rates and develop interventions to improve their financial resilience. 

Katherine Leong, impact strategist at SparkBeyond explained: “SparkBeyond empowers organisations across any industry to solve their most complex challenges. 

“Our Problem Solving Platform is designed to tackle the bias inherent in human thinking, combining internal data with a multitude of external data sources, to discover complex patterns and explain drivers of business outcomes. 

We are seeing some significant numbers on this, where people who never gambled prior to this are starting to gamble. Buy Now Pay Later usage is nearly as high as it was at Christmas, Corinne Proske, Speckle 

 “This was particularly relevant to the business problems Speckle was facing at the start of COVID-19 with a sharp increase in online applications, so we started talking about how we could partner to help Speckle better understand credit risk at a point in time where people were in need fair and affordable finance”.

When looking at the impacts of COVID-19 on consumer spending and debt, general manager of Speckle Corinne Proske explained: “COVID-19 has fuelled an increase in gambling, particularly among men. 

“We are seeing some significant numbers on this, where people who never gambled prior to this are starting to gamble. Buy Now Pay Later usage is nearly as high as it was at Christmas, where usually it would die down after this period, instead usage has continued. 

“Having taken paper money out of the system due to COVID-19, consumption of online stores and shopping has also been forced and there has been a rise in delivery food services such as UberEats. These behaviours are likely to flow on.” 

Leong continued: “SparkBeyond has a track record helping global banks with many different business problems but with COVID-19 we were all coming to understand that the data, which is so critical to AI, was changing rapidly and the last 2 months would be more critical decision making than data from the previous 2 years.” 

SparkBeyond's founders created the company with a vision that the platform could help to generate positive social impact on a planetary scale.  

“Working with Speckle is totally aligned to our DNA and Speckle shares that same passion for scalable social impact”.

SparkBeyond has a track record helping global banks with many different business problems but with COVID-19 we were all coming to understand that the data, which is so critical to AI, was changing rapidly and the last 2 months would be more critical decision making than data from the previous 2 years, Katherine Leong, SparkBeyond

Proske explained that Speckle had been in contact with SparkBeyond over the last 12 months, however COVID-19 created a moment that sparked this partnership. 

Proske said: “from an alignment perspective, we worked together on how to solve from the problems space. 

“SparkBeyond rapidly goes through a large repository of customer data from application to approval to transactional data and provides actionable insights. 

“While some of the insights confirmed what we already knew, other insights were really interesting and contrary to what we expected”. 

Proske reflected on some of the early insights gained through the partnership with SparkBeyond, including how “if you have an existing credit card, you are less likely to default on your personal loan than if you had never taken a loan prior. This tells us that if you can manage a credit card, you can budget to some extent”.

Another interesting finding, explained Proske, was that “customers are a higher credit risk if they are paid weekly, rather than monthly. 

“It suggests that default risk it is not just about the level of income but rather a mismatch in the timing of cash inflow and outflows, so even if you earn the same amount as someone else, you are at a higher risk than other customers. 

“These insights gave Speckle a clear argument to tie in income payments and loan payments in the same period and put the customer in a better place to move forward”. 

The partnership between Speckle and SparkBeyond will enable Speckle to utilise data to understand their changing customer needs during this period, and to help them build positive financial habits.  

SparkBeyond will also be assisting Speckle in automation of credit decisions and cost reduction to maximise the impact Speckle can have and help build a financially resilient community.  

Financial stress is increasing and this continues to be exacerbated by the consequences of COVID-19. 

ABS data has shown that the proportion of Australians who are unemployed has grown at an alarming rate, and as of June 2020, ABS data showed that 7.4% of Australians are unemployed which is a sizeable increase from 5.3 per cent in June 2019. 

The latest RFi Group data also shows that Australians under 35 are the most likely age group to report an actual or expected decline in their income, and current personal and car loan holders are the most likely to indicate that their income has declined or is likely to decline. 

What the data shows 

RFi Group data shows that nearly 1 in 5 (16 per cent) Australians hold a personal or car loan, and 1 in 10 personal loan holders took out their loan to pay for living expenses or unexpected expenses such as a bill or car repair. 

These borrowers are more likely to be younger, and RFi Group data also shows that this age group are more likely than older borrowers to anticipate future difficulty in meeting repayments.

Personal loans taken out for living expenses or unexpected expenses are typically taken out due to necessity and often funded by a lender such as a Payday lender that can provide access to funds quickly and with minimal documentation required. 

ASIC recently released an interim report  outlining its strategic priorities in response to COVID-19, and an area that was highlighted was how consumers may become increasingly reliant on high cost and short term credit products in a time of increased consumer anxiety and be at greater risk of exploitation. 

Leong sees that the Speckle and SparkBeyond partnership has the potential to create a profound impact in Australia, explaining how Speckle and SparkBeyond “both share an understanding that the status quo won't hold and that innovation will play a role in disrupting financial systems. 

“The question was whether that system would be more or less equitable.  

“Speckle delivers affordable digital loans and budgeting that helps people manage money better, addressing a gap in the financial resilience safety net. 

“By better understanding the people applying for short-term cash loans, Speckle could make better decision about who to lend to, based on data, and this data could also be used to help regulators and government create appropriate regulation and policies that govern this sector.” 

Proske reinforced this sentiment stating “now that Speckle has a significant data source, we will be working with the government and policy makers on data insights to show what trends are coming through. This is a key contribution we can make to the community”.

Speckle has also built an easy to use budget management app that consolidates and organises the account information of customers, so they can have a clear understanding of their finances, set goals and access simplified budgeting tools. 

The app is run in partnership with Frollo and using screen scraping will be enable access to customer information on spend, income and bill payments via an encrypted and secure platform. 

Proske commented, “Some of the insights we can learn through AI from SparkBeyond will enable us to add in nudges in the budget tracker, so customers can proactively get their habits on track. 

“The app will be a full portfolio of offerings, helping people bounce between income levels and provide tools on budget tracking, savings and managing their loans.

“The current recession shows us we have been living on the edge and not putting away enough savings, and we are carrying a lot of debt. 

“[Consumers] don’t necessarily understand what their bank balances are and their income versus expenses. The app will be largely focused on Speckle customers and people who fall out of being approved, and this will help them get back on track and work on their financial health.”

Anna Shaw is the client insights manager at RFi Group.