Since there has been a tremendous rise in demand for credit from the new-to-credit clients, credit bureaus have progressively started focusing over custom data analytics as well as alternative data associations with the fintech corporations. The new-to-credit customers getting into the recognized credit system extensively consists of 2 groups i.e. the youthful, digitally native sector pus the unorganized sector that includes micro, small & medium enterprises which have already started shifting away from the unrecognized or unofficial credit segment.

The rising number of new-to-credit clients

Credit information companies have only been authorized for collecting credit data from the banks so as to form the client’s credit score. However, due to the deficit of credit history of the new-to-credit sector makes it hard for the credit bureaus to score the mortgagors.

Credit bureaus have observed an alteration within the consumption patterns coupled with the discretionary expenditure of consumers. For instance, there is a significant rise been noticed in loans for consumer durables as well as a small number of personal loans, amongst others.

As per the data of information services company Experian India, more than 40% of the loans for consumer durables now taken by new-to-credit clients. The micro, small & medium enterprises sector has also seen an elevation in the number of new-to-credit clients’ mortgagors owing to their rising formalization as well as financial inclusion. Further, recent data by credit information company TransUnion CIBIL states that the number of new-to-credit borrowers augmented by almost 73 percent only within the first half of 2018.

Call for an Alternative Data Source

Credit bureaus suppose that the credit information companies require accessing an alternative data source so as to evaluate the creditworthiness of those individuals who probably not yet have any footprint in the organized credit segment.

According to an expert, the last decade has seen the entry of almost 300 billion Indians in the organized financial credit system; moreover, the retail industry only has seen an increase of approximately 30%. All this is an indication of massive potential in the integrating technology along with the backend processes including the processing of loan and credit underwriting. Furthermore, leveraging technology can widely assist money-mongers to not only target over improved growth in terms of lending but also to enhance the quality of credit management by the fintech companies.

Also, Indian credit reporting system is in line with the practices all across the globe, ought to let the credit information companies evaluate all the non-lender information that is essential for determining the creditworthiness of mortgagors, for instance, insurance premiums, utility bills, and other related data. Presently, there are 4 credit information companies functional in India i.e. Experian, CIBIL, Equifax as well as CRIF Highmark.

Analyzing Custom data

Officials at credit bureaus believe that the rising requirement for alternative data sets, the difficulty of assessing the creditworthiness of new-to-credit clients as well as the swift growth in online lending has led towards the growing demand for analyzing the custom data.

Moreover, over the spell of several years, the acceptance, as well as an understanding of analytical models, have been improved within the industry. Now the credit bureaus offer analytical solutions to the new clients, also for new problems of their business. Besides, analytics is no longer restricted to risk modeling. There are even more superior use cases such as complete lifecycle management of the customer or else supply chain management. Also, these bureaus are investing in innovative skills for instance; machine learning in order to elevate the accurateness as well as the analytical power of the models.

Alternative Data Associations

Even though credit bureaus have been continuously pushing for the access of alternative data sources, but there has been no development up till now I this ground. Therefore, bureaus are compelled to structure multiple associations so as to leverage alternative data.

Equifax- India has got a separate analytics firm known as Equifax Analytics with the help of which it usually enters into associations with the fintech companies. Recently, it has entered into 2 alternative data associations with the fintech company Account Score in order to offer the asset side data of customers as well as with the payments gateway company PayU so that it can offer online transaction data of customers, but both only after the consent of the customers.

Furthermore, CRIF Highmark recently entered into the partnership with the alternative data analytics corporation named- CreditVidya in order to offer lenders with extensive credit scores. This association would provide a holistic data analytics so that they can focus on new-to-credit customers of banks, non-banking finance organization as well as and credit marketplaces.

In addition, just in April one of the private lender-RBL Bank expanded its existing partnership with CreditVidya, with the hope of leveraging the latest big data underwriting platform all over its credit card & mobile banking applications.