The underserved or underbanked have always had a problem getting access to credit that is affordable. The panel at LendIt USA 2016 entitled, "Providing Access to Credit in Underserved Markets" explored the different types of thin file borrowers around the world.
Lenders first need to understand who they are looking to serve and be sure to define their market. Understanding the type of borrower you are looking to serve will allow you to better evaluate the limitations of the data you will receive from this borrower.
How do lenders look to serve borrowers with a thin file, no file or limited data set from the traditional credit bureaus? They look to compile alternative data to help them evaluate the different borrowers.
These non-traditional lenders will pull some traditional data, as well as alternative credit bureau data and proprietary data such as questionnaires they ask to these borrowers. Alternative data can be phone payment records, bank transaction analysis and social data.
These newer lenders are no longer constrained by technology; banks used to have about thirty variables to analyze a borrower, now companies can look at two or three times that amount and are no longer limited by legacy technology.
LendUp, ZestFinance, China Rapid Finance and Oportun all serve a different type of borrower, but they all extend credit to the non-prime, non-traditional borrower. Serving these types of borrowers has additional impacts as well, the more people that are able to access affordable credit the better it is for broader communities.
To learn more about the latest trends and technology in credit and underwriting please join us at LendIt USA 2017, where we will have a dedicated track covering the market.
