Leveraging alternative data to promote financial inclusion

Finovate Fall 2022

NEW YORK CITY — Lenders who haven’t entered an underserved market are leaving money on the table, but by leveraging alternative data sources, financiers can help improve financial inclusion while helping improve financial inclusion. You can grow your consumer base.

©Can Stock Photo/kentoh

Lenders must look beyond the borrower’s credit score to get an accurate picture of the risks associated with lending to a particular consumer. Ricardo BandeboExecutive Vice President and Chief Product Officer Vantage Scorea credit risk modeling and analytics provider, said Wednesday: finobatefoll in New York City.

Currently, credit scores reflect items such as a borrower’s payment performance and length of credit history, but they don’t provide all the information lenders need to “evaluate people fairly.”

“Income is probably one of the most important factors. It’s not just the amount of income, but the stability and source of that income that makes a big difference,” he said, adding that understanding the borrower’s assets, liabilities and cash is essential. also pointed out to be important. flow. “In an ideal world, when trying to make a lending decision for an individual, he wants to have a good grasp of these three areas.”

“Large impact”

Vandebo said VantageScore leverages data from millions of consumer checking and savings accounts, including checking and debit account histories and credit file details, to calibrate the scoring model. I was able to.

“We found that adjusting the checking account data not only had a significant impact on predictability, but also on our ability to score more fairly,” he said. In a model that leveraged bank account data, 18% of subprime consumers scored more than 20 points higher, while some scored lower.

Using bank accounts and other alternative data “could really help lenders and fintechs … in situations where it’s worth doing a little more due diligence to make credit decisions,” he said. rice field.

By creating more comprehensive scoring models, lenders and fintechs can extend credit access to more consumers, expand their own servicing markets, and better assess the likelihood of borrower default. Vandebo added that it can be predicted that

Borrowers say, “You can’t get credit without a credit score. You can’t get a credit score without a credit history, and you don’t have a credit history unless you get credit,” he said. By including additional data sources, we can break that chain.”

Automotive Finance Summit, the premier industry event For auto lending and leasingreturns October 26-28 at Wynn Las Vegas. Find out more about the 2022 event and registration here. www.AutoFinanceSummit.com.

https://www.autofinancenews.net/allposts/auto-finance-excellence/technology/leveraging-alternative-data-to-increase-financial-inclusion/ Leveraging alternative data to promote financial inclusion

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