In this article, we explore the slow-pace of change by financial lenders from binary online customer applications workflows to iterative digital onboarding decisioning and ask the question why this obvious next-stage in online lending evolution is taking so long.


Since the start of statistical assessment of credit risk, the outcomes have been binary – the “Goods” are separated from the “Bads.” This was good enough to manage bad debt and ensure the “Goods” paid for the “Bads.”  But that was before the FCA. 

The traditional ‘yes or no’ response to a generic applications request is insufficient to cope with the diversity of the online lending audience that includes vulnerable customers, individuals that lack access to bank accounts, and people beginning their application journey from a variety of different start-points in the personal finance lifecycle.

Why?  Because the majority of transformative agendas have focused on reducing back-office complexity and inefficiency, for internally focused cost and speed benefits.  Customers’ time to serve has reduced, but little else.  Customer front-ends have remained largely untouched, for years in some cases.  Where customers used to be filling out paper application forms, they now complete the same standard forms online, asking for information from not required from one group of customers, not asking important questions for other groups.

The Problem 

Digital engagement today is binary: Not because computers work in ones and zeros, but because digital journeys are created ‘One size fits all.’  Faced with these options, customers have just two choices presented to them; either answer everything, or be declined.  On the other side of the binary processing fence, lenders themselves have two choices; They must decide whether they have enough to establish that lending is responsible, or decline the customer.

As Julian Graham-Rack, CEO for PrinSIX technologies explains, “Decline is the go-to solution to manage regulatory risk in today’s market.  But to decline an applicant is a poor customer outcome, as the lender is declining access to financial services to those that may need them but whose circumstances don’t ‘fit the model.’  Equally, the decision to decline an applicant is a poor commercial outcome because it reduces commercial opportunity, maybe unnecessarily.”

Binary Decisioning

The New Lending Reality

From 2014, a new risk materialised—compliance risk associated with responsible lending.  The FCA asked the question, ‘Is lending affordable, sustainable, suitable, and with due regard for customers’ potential vulnerabilities?’   Since then, the FCA has further added to their definition of vulnerability, by identifying four core cohorts, namely Financial Resilience, Health, Capability and Life Events.  Within each of these, there are many examples of what might trigger each category. But the assessment method of this escalating risk is the same as credit risk – split the regulatory “Goods” from the regulatory “Bads”. 

What’s the learning lesson we take from all this?  It’s that the binary ‘YES/NO’ applications process needs to be displaced with near-real-time iterative decisioning that fine-grains applicant journeys into much smaller cohorts of applicants—so every customer is treated individually, so every customer is treated fairly.

Taking the human approach 

The real world is not binary.  Everyone has complex and unique lives, so why are we still trying to split everyone into only two cohorts? 

Graham-Rack adds, “In the real-world, people are not understood by asking them a fixed set of questionsIf you interview for a job, you don’t go down a fixed list of questions, then decide whether to hire or notYou ask a question, listen to the answer, and then start a conversation.  You probe, explore, and test understanding of people.  The next question comes from what went before.  You know what you need to understand, but you don’t use a script. Why treat digital differently? You need digital conversations, but today’s binary journeys don’t deliver them.

The Alternative to Binary Decisioning?

Using a personalised digital onboarding solution, underpinned by point-and-click editing tools, digital conversations can be made adaptive and responsive.  Journeys can be dynamic to treat every applicant as an individualConversations that stop as soon as they reasonably can but continue for as long as needed to truly understand the customer.  They need to develop, learn and improve quickly. They need to be adaptable to different circumstances 

That means no more ‘One Size Fits All.’  Each journey is personalised to each customer. No more binary cohorts, but multiple cohorts, with multiple potential outcomes to serve more groups of customers, better.  ‘Not sure, Decline’ decisions are prevented by adopting onboarding journeys that extend until the right decision can be made with confidence.

To learn more about the possibilities of personalised onboarding as a route to (1) obviating FCA Principle 6 risks, (2) maximising the value of Open Banking data, and (3) addressing vulnerability options, read the FCA Sandbox White Paper.

About PrinSIX

PrinSIX add customers

Add Customers Without Adding Risk

PrinSIX offers a services-led digital platform that uses real-time analytical learning ‘at the speed of digital’ to orchestrate unique customer onboarding journeys, one decision stage at a time.  PrinSIX meets the needs of lenders, regulators and customers fully and simultaneously; equipping lenders to maximize customer experience and lending while minimizing cost and risk; with a major concern being regulatory compliance—an existential threat.  

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About the Author

Ian Tomlin is a management consultant and writer on the subject of enterprise computing and organizational design.  He serves on the USTECH GLOBAL European Management Team.  Ian has written several books on the subject of digital transformation, cloud computing, social operating systems, codeless applications development, business intelligence, data science, office security, customer data platforms, vendor management systems, Managed Service Provisioning (MSP), customer experience, and organizational design.  He can be reached via LinkedIn or Twitter.