October 19, 2023 | Louise Basse
Based in Paris, Algoan is a forward-thinking fintech company that is on a mission to reshape the credit scoring industry by building fairer and more transparent credit decisioning tools.
To do that, Algoan teamed up with Mastercard to implement open banking solutions in Europe. Now, Algoan’s credit scoring platform is based on detailed, up-to-date and error-free financial data that allows for instant and efficient credit decisions.
We sat down with Algoan’s co-founder and CEO, Michael Diguet, to explore how open banking can benefit the lending industry with better and more inclusive credit decisions.
When determining whether a person or business is qualified for a loan, having access to the very latest and most accurate financial data is crucial. But for many decades, the traditional credit scoring industry has been associated with long, manual processes that have left room for human mistakes.
With open banking, that’s all about to be a thing of the past, says Michael Diguet, who founded Algoan five years ago to change traditional credit scoring practices:
“We knew that the credit industry was relying on outdated technologies, leading to problems such as limited access to credit or over-indebtedness. We wanted to build a fairer and more evidence-based credit scoring model that embraced the new possibilities of open banking,” he says and continues:
“Open banking data is rich and factual. It allows for credit decisions that are fair, ethical and responsible. A high-performing scoring algorithm means more inclusive and responsible credit. It approves those who can repay and avoids giving credit to those who risk over-indebtedness. Because open banking data is factual, it allows us to focus solely on the financial aspect, avoiding any ethical biases.”
Open banking reduces the time and resources spent on credit decisions by automating manual processes, increasing efficiencies – and, even more importantly – creating a more inclusive credit industry, Michael Diguet explains:
“Anyone with a bank account can share their data and get a score with open banking. This wasn't the case before. People with limited data – such as young people or immigrants – couldn't get a credit score because they simply didn’t have the required information.”
Algoan’s credit scoring platform combines machine learning and data analytics to offer lenders and banks a comprehensive suite of innovative credit decisioning. Therefore, it was important for Algoan to find an open banking provider that they could trust to securely deliver the highest quality data.
“Security, quality and reliability were crucial elements for us when choosing an open banking partner. We work in a highly regulated field, and it’s essential for us to provide our clients and their users with a trusted service and a guarantee of data privacy,” Michael Diguet says.
Because Algoan’s technology is being used by big, global players who operate across Europe, it was also important for Algoan to choose an open banking provider with extensive European coverage.
“After just a few months of working together, we’re very pleased with our partnership and our initial achievements. Mastercard has clearly shown us a strong and sincere ambition towards the development of open banking, especially when it comes to lending use cases. Our collaboration is smooth and efficient, and it’s been obvious from the beginning that we share the same ambitions and set of values,” he concludes.
If you want to know how you can use open banking to create data-driven credit scoring models, head over to our open banking blog for more inspiration.