A Tough Summer For Open Banking Powered Lenders

In the world of finance, where innovation is rapidly reshaping traditional models, two notable UK fintech players, Koyo and Fronted, have recently shuttered their doors. These closures signal a challenging summer for lenders using alternative data to underwrite, ultimately impacting the underbanked population in the UK. Despite these ventures offering solutions to the financial woes of those less economically secure, their demise comes at a critical juncture of rising interest rates and a mounting cost of living crisis.

Why Alternative Data Matters

Koyo provided personal loans to individuals who found it difficult to access credit via traditional means by using open banking and AI to create a more holistic picture of a user’s creditworthiness. Koyo encouraged users to link their bank account via open banking to receive a decision beyond the traditional credit score in less than 3 minutes. Applying for a Koyo loan did not impact the customer’s credit score. The fintech, founded in 2020, succumbed due to an inability to raise fresh capital. This is despite a Series A Extension in 2022 that says GBP 100 million in debt and GBP 5 million in equity.