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Alternative Data
Discover how alternative data sources are transforming credit assessments for unbanked populations worldwide.
Discover how alternative data sources are transforming credit assessments for unbanked populations worldwide.
Millions of consumers over the world have no or limited access to banking services. According to the World Bank, this category of population numbers 1.4 billion people.
At the same time, India is recognized as the leader among the countries with the least financial inclusion. Here, 63% of residents remain unbanked, which exceeds even the figure for southern African countries.
This trend poses a problem for the lending industry. Lenders who use the traditional scoring model may not consider such individuals as potential borrowers.
After all, when deciding on a loan application, they rely on financial information about the client, which unbanked people, naturally, do not have.
Non-traditional data sources are coming to the aid of credit institutions. They allow you to form a complete picture of the consumer’s creditworthiness and make an informed decision on a loan application.
Next, we will discuss alternative data in finance.
Alternative data is information that evaluates a borrower's creditworthiness but goes far beyond the borrower's credit history and traditional credit score.
Such data includes potential borrowers' online activity, information on rent and utility payments, employment and education records, and more.
Some statistics indicate the effectiveness of using non-traditional data in credit scoring.
According to Statista, there are 5.44 billion of internet users and 5.07 billion of users in social networks in the world.
This is 67.1% and 62.6% of the world population, respectively.
In other words, scoring models enriched with alternative data provide information about 5+ billion people on the planet.
According to Exploding Topics, the number of subscribers of streaming services reached 1.8 billion in 2023.
In the US, 83% of households have at least one subscription to a streaming service.
The timeliness and amount of payments will indicate the reliability and solvency of the consumer.
According to Statista analytics, there are 7.1 billion users in the world of mobile communications, and in the future, this figure will only grow:
This is why it makes sense to use alternative data in the credit industry, especially in emerging markets, where traditional data is extremely scarce.
The RiskSeal credit scoring system receives alternative data thanks to deep digital footprint analysis.
Our clients can enrich their scoring models with the following data:
1. Consumer activity on social networks. The RiskSeal digital credit scoring system offers lending institutions a variety of checks based on information about users on social networks.
Among other things, we check the phone numbers and emails to which profiles are registered, compare user photos in different accounts (Face Match technology), and determine how long ago the account was created.
2. Online resources. Data from gambling sites, e-commerce platforms and streaming services with paid subscriptions are informative.
Information from delivery and taxi calling services is also valuable.
Data from these resources can help provide insight into a borrower's financial habits and purchasing behavior.
3. Email Address Information. Our email lookup solution allows you to determine how long ago a mailbox was created and also check whether online accounts are registered to it.
A new email address without a single associated account will be a reason to suspect fraud.
4. Phone number data. Reverse phone number lookup is a technology available to RiskSeal users. It involves searching for alternative data based on the borrower's mobile phone number.
By providing us with the borrower’s personal details, which include their phone number, you will receive information about all online accounts registered to them.
You will also have information about the cellular operator and the type of device the applicant is using.
5. IP address data. Thanks to the location match check, you will have access to information about the exact geographic location of a potential client.
You will also be able to assess the risks associated with the borrower’s specific region of residence.
Digital footprint analysis performed by the RiskSeal platform creates a Digital Credit Score of a potential borrower.
This allows lenders to increase the efficiency of risk management, reduce fraud and expand their customer base.
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Top 10 Alternative Data Providers That Serve the Credit Industry