Benefits of the implementation of alternative data

1. What are the benefits of the implementation of alternative data? Traditionally, banks and digital lending platforms focused mainly on the credit score of the loan applicant during the underwriting process. This made it difficult for people to get loans or credit if they did not have a proper credit history. To increase their customer base and make it easier for people to get loans, many banks and digital lending platforms have started using innovative solutions like alternative data. With its help, they can determine the creditworthiness of an individual even if they lack a proper credit score. Here are some more benefits regarding alternative data that you should know about. The benefits of using alternative data in the lending market are: ●Every online user generates alternative data: Alternative data can be defined as the online data which is collected by fin-tech companies to help them determine the creditworthiness of the individual. It can take into account their social media activity, e- commerce wish lists, online recharges and bill payment records, education, and employment details, etc. This type of data is generated by every online user. Fin-tech companies take this data and analyze it using their algorithms and machine learning models. It can help them to ascertain the financial behavior of an individual.

2. ●It helps people from rural and remote areas to get loans: When you look for customers who lack a proper credit history, most of them are from rural and remote areas. They do not have high fixed incomes and have to sustain themselves on daily wages. It makes it impossible for them to access credit cards and loans as they do not meet the criteria for these services. Thus the implementation of alternative data can improve the situation. The reach of smartphones and the internet has allowed everyone to use online resources. The data generated here can be used as alternative data by banks and digital lenders in the credit underwriting process. Thus, even people from rural and remote areas can now apply and get loans with this. ●Giving access to alternative data can make the credit underwriting process more accurate: We have stated earlier that analyzing alternative data can help banks and digital lending platforms to check the financial behavior of a person more accurately. For example, even if there is a default on debt/bill payment, with the help of alternative data, we can check if the user has submitted all their previous payments in full before the due date. Thus it makes the credit underwriting process more accurate. These are the benefits that customers can receive with the implementation of alternative data.