Empowering Women: Leveraging Technology and Regulation to Combat Gender Financial Inequality & Poverty
Gender Discrimination in Financial Services
In the world of financial services, gender discrimination persists as a significant barrier to economic empowerment for women. This issue was brought to light during my consultation with a UK lender, where we delved into the disparities faced by women in credit scoring systems. In the UK, one's credit score heavily influences access to essential financial products like consumer loans and mortgages. However, the conventional practice of many financial products being registered under the husband's name within couples has perpetuated a systemic problem, raising the husband's credit score whilst penalising their partner's score.
Photography: Andrea Tummons
Challenges Faced by Women in Credit Scoring Systems
Upon separation, women often find themselves burdened with a poor credit score, solely based on the fact that they never had any financial product registered under their name, irrespective of their financial prudence or earning capacity. This disparity restricts their ability to secure loans for critical needs such as transportation for work or investments in business ventures. Consequently, women encounter diminished employment prospects and hindered wealth accumulation opportunities, exacerbating the challenges stemming from a marital breakup.
Remarkably, this underserved demographic represents a substantial market segment overlooked by traditional lenders, representing a significant untapped revenue stream.
The pivotal question emerged: how can we accurately evaluate the creditworthiness of women and facilitate their access to financial resources without reliance on traditional credit scoring mechanisms?
Leveraging Technology and Regulation for Product Solutions
Drawing from my experience developing applications for banking clients and employers, leveraging the opportunities afforded by the Payment Services Directive 2 (PSD2) regulation offered a promising solution. PSD2 grants licensed entities access to comprehensive banking statement data of customers, opening avenues for innovative service provision. Recognising this potential, I suggested harnessing this data to perform automated analyses of applicants' earning and spending behaviours.
The envisioned solution entailed the development of a robust application platform capable of interfacing with multiple banking institutions to retrieve relevant financial data. Subsequently, sophisticated algorithms would be employed to analyse this data, enabling lenders to evaluate credit risks and make informed decisions without ever having to look at a credit score.
The implementation of this digital product revolutionises lending practices, extending financial inclusivity to a segment of the population previously marginalised by conventional credit scoring metrics. By leveraging technology and regulatory frameworks, we not only addressed gender financial inequalities but also unlocked opportunities for economic empowerment and social advancement for women. A win-win situation for both social impact and business success!