Understanding how applicants spend money is critical for assessing the suitability of the loan product applied. Testing an applicant’s ability to afford and maintain the agreed repayments is an essential part of the FCA's credit worthiness assessment requirements.
Insights are made possible through precise categorisation of transactional data. Improved analysis of spending patterns by grouping them into specific categories, for example transport, insurance, and utilities. As a result, Loan Officers benefit from concise insights into an applicant’s financial habits.
Yet, challenges arise when new merchants appear or when existing merchants change payment providers. These situations lead to unfamiliar or incomplete data, making affordability assessment harder.
Some transactions are clear. 'Tesco Mobile' has a clear Merchant ID and transaction description. However, others, such as 'MT SECURETRADE LIM' present a categorisation challenge because of the vagueness of the information provided by the merchant.
To overcome this, NestEgg provides Open Banking self-categorisation.
Users can manually adjust or update the category assigned to transactions from within the Decision Engine Dashboard. If a transaction appears uncategorised or misclassified, simply select it and choose a new category.
Identifying and Re-Categorising Transactions
Spotting Uncategorised or Mis-Categorised Transactions
In the Income and Spend tabs, use the Transactions table to quickly identify mis-categorised or unclassified transactions.
Tips:
Use quick filters in the Transactions table to navigate by category, sort by amount, merchant, or other columns.
Use the search function to locate specific transactions effortlessly.
Re-Categorising a Transaction
Once a transaction to re-categorise has been identified:
Select a New Category
Click the three vertical dots next to the current category in the transaction list.
A small window will appear—choose the appropriate category from the drop-down menu based on your understanding of the transaction.
(Tip: in the drop-down menus you can use the keyboard to quickly navigate to the category you want. For example, in the video above we navigate to the categories beginning with H by hitting the H key while the menu is open)
Apply to Similar Transactions (Optional)
After selecting the new category, decide whether to apply the change to similar transactions. If unselected, only the current transaction will be updated.
Re-Categorising Similar Transactions
When applying changes to similar transactions, you'll be prompted to specify how to match them:
Match Options: Transactions can match Exactly, Start with, End with, or Contain specific text in their description.
Exact
If the option is used to categorise a transaction, only transaction descriptions that match the given text exactly will be re-categorised. This should only be used in specific situations where an exact match is required.Starts with
When this option is selected, only transactions whose descriptions begin with the specified text will be included. This is particularly useful for grouping recurring transactions that share a consistent prefix, such as "giffgaff" or "O2"Ends with
Selecting this option will re-categorise transactions whose descriptions conclude with the specified text. This can be helpful for transactions that include dynamic prefixes but end with consistent details, such as "EE.CO.UK GB" or "Grocery Store"Contains
This option captures transactions that include the specified text anywhere in their description. It is the most flexible choice and is ideal for identifying transactions with shared keywords, such as merchant names or specific terms. For most scenarios, Contains is the recommended option due to its broad applicability.
Tip: In most cases, the Contains option works best. Other options are helpful for specific cases. For example:
Consider the transaction:
Contactless Payment A & S CONVENIENCE STOR APPLEPAY 0622 2024-10-20
Most of this description is redundant for categorisation. The key information is A & S CONVENIENCE STOR. Using the Contains option ensures all relevant transactions with this text are included.
Finalising the Process
Review Included Transactions
Once you've selected a match method, you'll see all transactions that fit the criteria.
Deselect any transactions you don't want to update.
Tip: If too many irrelevant transactions are included, consider refining the match criteria or method as the chosen description may be too general.
Apply the changes
Once satisfied, click Update to apply the re-categorisation. The system will immediately recategorise the transactions in the current decision, update the tables and graphs.
Note: any decisioning rules will not be run again.
A categorisation rule will be submitted for NestEgg to review and approve. If approved, the new categorisation will be applied to future decisions.
Observing Changes
After the decision has refreshed you will be able to view the impact of the categorisation changes you have made.
When you navigate back to the Spending, Income or the Balances tab, you will be able to find the transactions in the correct category.