10/01/2026
LONDON — A third (30%) of the UK lending market is being underserved amid heightening scrutiny around affordability and compliance rules designed to raise the bar for how lending decisions are made, according to the latest market study: Role of Alternative Data in Credit Decisioning from Chartis Research and LexisNexis® Risk Solutions.
In line with HM Treasury’s push to expand access to affordable credit, nearly all (98%) lenders say they are now incorporating affordability assessments using both bureau and open banking data, revealing a shift in decisioning toward real-time evaluations of income and financial resilience rather than relying solely on historical credit behaviour.
A majority (70%) of lenders say this, combined with a lack of reliable data to assess thin-file customers, results in them favouring the conservative middle ground of prime and near prime borrowers. Just 30% of lenders now target the higher-risk extremes of the lending market – sub-prime and super-prime borrowers – indicating a market preference for predictable credit performance over aggressive portfolio expansion.
While traditional bureau data remains the basis of 87% of credit decisioning, lenders say they are unable to decide on as many as 1 in 10 applicants. Conventional banks, cooperatives and alternative finance institutions are less likely to successfully score a customer than challenger banks and credit unions.
Meanwhile, 74% of lenders already using alternative data in scoring report improved portfolio performance. Digital-first lenders, such as alternative finance institutions, lend on average 12% more to their customers, and challenger banks 10% more. Among more traditional institutions utilizing alternative data scoring, banks report a 7% approval increase and credit unions a nearly 4% increase.
Lender confidence is on the rise too, with nearly two-thirds (61%) reporting greater positivity in lending decisions based on alternative sources like employment and income data, credit behavioural data and utility payments data.
“These findings highlight a clear tension in the UK lending market – growth ambition versus the confidence to address the huge market potential outside of traditional prime segments,” said Neil Allen, head of UK credit risk at LexisNexis Risk Solutions. “These under addressed segments, coupled with 10% of applicants failing to receive any lending offer, suggests that the credit market needs to evolve. The benefits of alternative data have already been realised market wide through affordability tests and its application across lending decisions must now follow. With three in four lenders already reporting improved portfolio performance and nearly two-thirds reporting greater confidence in their decisions, the evidence is overwhelming.”
One in eight UK adults is considered ‘financially stressed’, according to a 2025 financial inclusion study by LexisNexis Risk Solutions. Of them, around 2.45 million are unable to secure a loan from any provider after making an average of 30 applications. The same study found that around 2.8 million financially excluded people in the UK could be successfully scored using an alternative credit score.
Allen continued, “This really matters for financial inclusion. The continued reliance among lenders for large historical datasets and established scoring methodologies means millions of financially stressed consumers are left without access to affordable credit. When you consider that over half of them can be successfully scored using alternative data, it seems logical that the system should level up to serve everyone who needs it.”
Anish Shah, Research Director at Chartis Research, added, “The UK lending market is facing a clear decisioning gap: lenders want to grow, but traditional data alone is limiting their ability to assess underserved borrowers confidently. Alternative data can help close that gap, enabling more precise risk assessment, stronger portfolio performance and broader access to credit.”
The most common alternative data sources in use in credit decisions include employment and income data (98%), behavioural data (72%), utility payment data (58%), and rental payment history data (54%). Conversely, less established alternative data sources such as mobile payment behaviour (5%) and social media activity (2%) remain relatively underutilised due to concerns about regulatory acceptance and data quality.
The study conducted by Chartis Research surveyed 100 UK lenders across traditional banks, challenger banks, alternative lending providers, credit unions and co-operatives.
LexisNexis® Risk Solutions provides customers with information-based analytics and decision tools that combine public and industry-specific content with advanced technology and algorithms to assist them in evaluating and predicting risk and enhancing operational efficiency. Headquartered in metro Atlanta, Georgia, the company has offices throughout the world, serves customers in more than 190 countries and territories and is part of RELX. For more information, please visit LexisNexis Risk Solutions and RELX.
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