Lending

Six Biggest Problems with Alternative Data

MEDICIGlobal Head of Content

In the US, approximately 25% of consumers are considered thin-file because they have fewer than five items in their traditional credit histories. About 7% are a no-hit (records other than the five items of the traditional framework) and 9% are completely invisible – they have no record of credit. Globally, about 1.7 billion adults remain unbanked – without an account at a financial institution or through a mobile money provider.

One of the problems with extending financial access is the lens through which the formal financial system assesses one’s creditworthiness. Lenses vary in different countries, but one is constant – existing frameworks have not been able to effectively expand the addressable market. Financial technologies, however, have a role to play in changing the very framework.

With the abundance of digitized behavioral data available to those companies today – social media, search, mobile money, bills, shopping history, rent, etc., – anyone can lend. Facebook alone targets ads based on 98 data points on every user. The number of FinTech startups in the alternative credit scoring space varies from several hundred to hundreds of thousands. The hallmarks of one’s lifestyle imprinted in continuous data flow are increasingly...

Elena Mesropyan

MEDICIGlobal Head of Content

Global Head of Content, MEDICI

Elena is a research professional with a background in social sciences and extensive experience in consumer behavior studies and marketing analytics. She is passionate about technologies enabling financial inclusion for underprivileged and vulnerable groups of the population around the world.