Glasgow fintech company launches new tool for IFRS 9

Glasgow-based fintech company Castlight Financial has launched a new customer bank transactions categorisation tool which it says has been designed to meet the challenges and opportunities faced by the banking industry in the run up to the implementation of banking standard IFRS 9 on New Years Day.

The firm’s ‘Categorisation as a Service’ (CaaS) product takes a bank’s customers’ transactional data and processes it through the CaaS neural net.

This neural net has been “trained”, by processing over 100 million transactional records, to recognise 184 categories of discretionary and non-discretionary income and spending. For example, CaaS’s neural net can instantly identify and categorise salary, benefit payments, rental repayments, child care costs, the weekly grocery shop or how much is spent travelling to work. This enables much earlier identification of customer affordability issues than traditional CRA data.

In addition to CaaS’s categorisation processing power, the software has also been designed to analyse and report on spending patterns or “characteristics”. This function, integrated to meet the specific requirements of IFRS 9 shows up “red flags” where vulnerable customers are showing changes in spending patterns or behaviours. This may be as detailed as the cancellation of regular charitable gifts or returned direct debits, factors that help identify early signs of financial distress.

Banks are also given the opportunity to opt into Castlight’s “CaaS batch service” where batches of customers’ transactional data are run through CaaS each month. In seconds, comparisons are made with previous months and the red flags pop up highlighting accounts that are showing signs of stress.

Phil Grady, CEO of Castlight Financial, said: “And of course, behind these red flags and stressed accounts are vulnerable households on the brink of financial trouble. We believe that CaaS is not only a crucial tool for a robust, responsible response to the requirements of IFRS 9 but an important buffer for vulnerable clients. With further interest rate hikes around the corner, it can only be a good thing that customers can rest assured that their lender is looking out for any distress signals and is ready and able to help.”

Mr Grady added: “The forward-looking perspective of IFRS 9 with its emphasis on the importance of anticipating loan losses before they happen is a very welcome regulation in a world where the shock waves of the 2007 financial tsunami still reverberate.

“But of course, for banks there is a real challenge to put the technology in place to deliver the required programme of unprecedented loan health monitoring. At Castlight we have been developing a stable of fintech tools over the last 2 years to help create greater financial stability for both individuals and institutions. We are delighted that we are able to launch CaaS (Categorisation as a Service), a powerhouse of categorisation and analysis technology which will allow banks to not only meet the requirements of IFRS 9 but offer customers highly tailored support and access to new products.”