How Subaio created a smarter way to assess creditworthiness

Founded in 2016, Subaio is a Danish-based software company that has become successful thanks to its subscription management platform that has helped consumers see, manage and cancel their subscription with one simple view.

In recent years, Subaio has built and launched an entirely new product using the same technology. With this product, they’re able to help financial institutions, banks and leasing companies assess consumers’ creditworthiness in an automated way. 

We sat down with Søren Nielsen who’s the Chief Commercial Officer at Subaio to hear how he thinks open finance can be leverage in the lending industry. 

Let’s hear what he said. 

 There’s no doubt that the traditional credit scoring industry has been associated with long, manual processes that have left room for human mistakes. But with Subaio’s creditworthiness product, that’s a thing of the past. 

Using Mastercard's open finance platform, Subaio helps financial players give a more accurate creditworthiness assessment by fetching real-time data directly from the bank, Søren Nielsen explains: 

“If you’re giving out a loan, a leasing agreement or anything else that requires a creditworthiness assessment, it’s important to get an accurate overview of the consumer’s actual financial situation. Our new product is a smart way to assess creditworthiness using financial data with the consent of the consumer. With that, we’re able to get an accurate and up to date overview of the consumer’s recurring income and expenses,” he says and emphasizes: 

“In today’s world, loans shouldn’t be granted based on statistical material alone. Just because you live in a specific area, have two kids and a house of a certain size, it doesn’t say anything accurate about your financial situation. Instead, our credit scoring product uses real-time financial data to assess the financial situation of the borrower – and that will for sure create a better lending industry with fewer loans that are less unlikely to be repaid by the borrower,” Søren Nielsen says. 

In addition to creating better lending conditions, Subaio’s new creditworthiness product also significantly automates the process of giving out a loan for the bank, leasing company or financial institution. 

“We have examples of banks that have hired about 15-20 new employees just to handle the new legislation on creditworthiness assessments. On top of that, we even have customers that have been forced to take their lending products off the shelf because they haven’t been able to live up to the new compliance aspect of doing credit scoring,” Søren Nielsen explains. 

Building the new credit scoring product wouldn’t be possible without access to high quality data, Søren Nielsen explains – and that’s why Subaio chose Mastercard as their open finance platform for their product:

“We know the entire open banking space, and we’ve known for a long time that Aiia has always focused on data depth and quality. To create automation and a product that works, we need as deep quality as possible to label the transactions and categorise them afterwards. That’s why we chose Aiia,” he explains.

The increased demand for better creditworthiness assessments was reflected in the EU’s revised version of the Consumer Credit Directive which came into effect in 2021.    

The directive was introduced to reduce the number of non-performing loans by ensuring that financial players identify customers’ income and recurring expenses before they give out a loan. On top of that, financial players also have to categorize and document these expenses – and that can be an extremely time-consuming and demanding task to do for individual banks and financial institutions.

It’s worth mentioning that the EU does not specify how financial players must comply with the new rules. But instead of hiring new employees to perform this task manually, many banks hope to find an automated solution that categorises financial transactions – and Subaio can do exactly that, Søren Nielsen says: 

“Subaio can automatically identify the recurring payments, categorize them and document it all for the needed creditworthiness assessment. It is what we do and we’re already helping numerous banks on this journey,” he concludes. 

If you want to know how you can use open finance to create data-driven credit scoring models, head over to our website.