Creating an app that helps vulnerable banking customers

Tijn Croon, a student in the Department of Geography, writes about his experience of being in the team that created the winning app idea in the 2018 Bank of England Technology Competition.

I’m a Sustainable Cities MSc student at King’s. In October last year, I asked fellow King’s student Rahma Hussein (BA History) and two fellow Dutchies – Lisa van den Boogaard (MSc Political Economy, University of Amsterdam) and Jurriaan Parie (MSc Data Science, LSE) – to team up and participate in the annual Bank of England Technology Competition. I believed this diverse group of people could help take my idea to the next level.

The Technology Competition challenges teams to come up with an app that takes advantage of Open Banking (PSD2). Before I explain the initial idea and the development of the app, it is important to define the problem we wanted to tackle. The UK has tremendous problems regarding unauthorised overdraft. At the end of last year, UK banks had two million customers stuck in permanent overdraft. I was flabbergasted when I read this in the Guardian. For those with financial difficulties or in the red, it is costly and creates a vicious circle of debt. Moreover, it is well-known that the consequences of persistent debt have pervasive effects on mental health. And even more striking, unauthorised overdraft is a cash cow for banks – over £1,2 billion of the banks’ annual revenues come from this type of financial ‘service’, according to the Competition and Markets Authority. As legislation and regulation in this country remains inadequate, there is a need for alternative solutions. We wanted to disrupt this unethical and out-of-date market of overdraft charges.

The Bank of England announced in late 2018 that it was looking for technologies that would help boost their newly developed Open Banking strategy. I just so happened to hear about the competition on campus – but while I was cycling home, I realised this was a chance to let the most vulnerable banking customers finally benefit from technological development and market competition. Open banking gives customers the opportunity to share financial transactions, which could potentially provide a helping hand to those with permanent overdrafts.

Together with my team, I developed OpenDraft, an app that combines the possibilities of PSD2, statistical learning and peer-to-peer debt counselling. Our algorithm predicts the user’s future planned and unplanned spending. Hence, the algorithm is able to predict whether the user will or will not overdraft in the next month. If the former, we suggest possible actions to anticipate the overdraft. Meanwhile, being connected with commercial bank APIs means that the OpenDraft app can provide on-the-spot credit solutions from commercial banks and determine the affiliated risk based on the user’s transaction history. The aim is to lead to more competition between commercial banks for credit loans and therefore result in more affordable default rates.

We were obviously psyched when we heard that we had won the competition – also because the award comes with a paid internship with the Bank’s Technology team. I think the best thing about partaking in the competition was the brainstorming process. Working out an impactful idea with creative and driven people really gives you a rush of excitement and motivates you to start other ventures.