Need a loan but your credit history is poor or poor? Now you can leverage your online activities via desktop, tablet or mobile and possibly get a Yes for your app.
Traditional loan companies such as banks don’t just collect personal information from loan applicants to help them decide whether to approve or decline. They also have a scoring model to check if you have the ability to pay. They look at your income, the assets you own, and your current debts or loan payments that you still make. Plus, they review your credit history and check for any debts you have left unpaid or if you have any credit experience.
The irony here is that most of the people who apply for loans are those with insufficient income to meet their needs (and possibly their wants), with little or no assets, and several running liabilities. Worse yet, they may have missed paying a credit card or utility bill in the past when they’ve been through a rough patch. There are also those who have no experience with credit, including new graduates who are looking for work or have just started working.
If they cannot access credit from regulated companies like banks, they fall prey to informal lenders where interest rates are far too high and missed payments can cause debt to rise beyond the limit. debtor’s capacity to pay.
Changing our outlook on credit
Is there a happy medium between these two extremes? This is where the fintech company CredoLab Between.
Launched in 2016, the Singapore-based company, now present in 15 countries, aims to change the world’s outlook on credit.
According to Shaun Scheepers, regional sales manager for Asia, CredoLab is stepping up the game “by giving lenders access to a new approach to assessing risk – using alternative data. With our integrated scoring solution, companies can convert metadata from customers’ smartphones or behavioral data from the web into highly predictive indicators of possible requester delinquency in real time.
Before you get lost in the technical jargon, we asked Shaun to explain this in simpler terms.
Good news for concert workers and new graduates
“If you are a concert worker without a fixed monthly salary or a new graduate, you are automatically at a disadvantage in getting your credit application approved,” says Scheepers.
Let’s call our concert employee Juan. He is motivated and has the potential to start his own business. Scheepers says the traditional credit reporting system will most likely reject Juan’s loan application due to lack of information about his financial health. “CredoLab is leveling the playing field for candidates like Juan. By taking into consideration their behavioral data and willingness to repay the loan, we can provide them with a strong case, leading to a higher likelihood of their approval.
If Juan approaches a bank or lender that uses CredoLab’s built-in rating technology, he will be asked for permission to share non-personal data from his web browsing history. Once he says yes to this unique access, “within seconds his credit score is generated and sent to the lender.” If his score falls within the range that indicates he is a creditworthy customer and follows the other rules of the lender’s credit policy, he is instantly approved, ”says Scheepers. It further ensures that “CredoLab only uses data consented to by the first party, so that the end user always controls what data he accesses”.
And if you think your prepaid phone plan is putting you at a disadvantage, think again. “We are looking at the metadata of the smartphone, not the network or the subscription plan,” Scheepers says.
So what exactly is metadata? CredoLab, if it has access to your smartphone, will look at up to 50,000 data points and they can include checking your calendar (for example, how many events were scheduled on a weekday vs. end, but not what the event is or who are participating in it), storage (such as the number of media files versus documents, without looking at the contents of the files) and contacts (not the actual contact information, but if the contacts are grouped or not). All of these elements combined will give CredoLab and its lending partner behavioral information about the customer.
Post-COVID-19 credit recovery
Beyond approving loans for Juan and people like him, CredoLab boldly claims that their alternative credit score can uplift an entire population, which is quite timely as the world’s economies try to recover from the slump. financial devastation caused by COVID-19.
“When we look at traditional credit scoring in the Philippines, most financial institutions generate credit scores based on only a handful of personal attributes. At CredoLab, we open up financial opportunities to anyone who owns a smartphone, even without a credit history or credit bureau data, ”says Scheepers.
Match made in internet heaven
Considering the growing Filipino love affair with cell phones and all that is web based, this could be a perfect match in internet heaven.
Scheepers pleads his case by pointing out that “in 2019, approximately 57.6% of the Filipino population used a smartphone. By 2025, it is predicted that around 77.1% of the entire population will use smartphones. By allowing more users to access loans with confidence, more of them are able to pursue their financial aspirations without compromising their privacy. “
CredoLab is gaining support in countries like the Philippines and Indonesia with a large pool of unbanked customers.
Here at home they work with CIMB digital only bank, where CredoLab played a key role in bringing the customer journey online and simplifying the onboarding process. “In just 10 months of its launch, CIMB has gained 1 million customers, and in 3 months of launching its personal loan product, they have seen 50,000 customer requests. When the pandemic hit, CIMB saw the average balance per customer and the average inflow per customer increase by 350% and 400%. By working closely with financial partners such as CIMB, we are able to promote financial literacy and encourage greater adoption of fintech solutions, helping Filipinos have more confidence in their financial decisions.
Scheepers adds that “one of the major Indonesian banks saw an 85% rejection rate and low predictability in their existing underwriting process prior to working with us. Using our custom credit scoring algorithm, the bank was able to analyze metadata from customers’ smartphones, resulting in a 107% increase in approval rates. This means that more Indonesians have been able to access credit scores and financial solutions, while protecting their privacy. “
By giving its financial partners an extra layer of behavioral information, CredoLab is helping open more lines of credit to unbanked and underbanked people “so our clients can take a confident ‘yes’ approach more often,” concludes Scheepers.
Warning: The opinions expressed in this blog are those of the blogger and do not necessarily reflect those of ABS-CBN Corp.
blog roll, blogroll, Aneth Ng Lim, Pay term, loans, loans, credit rating, fintech companies, fintech, CredoLab, smartphone metadata, Shaun Scheepers, digital banking, CIMB