Nearly All Financial Institutions Who Use
Alternative Data Indicate It Has Increased Revenue Growth by at
Least 15% and Improved Customer Experience
Eighty-four Percent (84%) of Survey
Respondents Use Alternative Data, Often Focusing on Deep Subprime,
Subprime and Near-Prime Consumers
ATLANTA, Feb. 15,
2023 /PRNewswire/ -- LexisNexis® Risk Solutions
unveiled the findings of its Alternative Credit Data Impact
Report, a nationwide survey assessing the adoption,
utilization and impact of alternative credit data for credit
portfolio growth and management in consumer and
small/mid-sized business (SMB) lending. The report surveyed
those who identify as senior decision makers for marketing, lending
and credit risk in U.S. financial institutions such as banks,
credit unions, non-bank lenders and fintechs.
Alternative credit data encompasses a broad range of credit risk
insights. These insights are typically not included in traditional
credit reports and scores including life event insights such as
professional licenses and asset ownership and modern credit seeking
behaviors from markets like online lending and short-term lending,
rental data, consented data and more. When paired with the
traditional credit behaviors currently used in conventional credit
scores, these non-traditional credit insights deliver a more
comprehensive view into a consumer's creditworthiness.
At least two-thirds of financial institutions surveyed use
alternative data in their credit risk assessments for underwriting
and portfolio management. Eighty-four percent (84%) of respondents
use alternative credit data in prescreening and credit risk across
the customer lifecycle, with credit unions taking the lead in using
alternative credit data (91%).
Other Key Findings from the Alternative Credit Data Impact
Report:
- Adoption of Alternative Credit Data: Alternative
credit data usage is becoming more common as financial institutions
adopt financial inclusion initiatives. Of the 37% of
self-identified leading adopters of alternative credit data, 55%
named financial inclusion as their top objective, followed by
improving segmentation (37%) and improving the ability to swap
in/swap out applicants (24%). Financial institutions are most
likely to use alternative data in their credit risk assessment of
deep subprime, subprime and near-prime consumers. Leaders of
alternative data adoption are also particularly likely to use it
when assessing the credit risk of prime consumers.
- Data As a Business Driver: Business drivers for
alternative data use include improving pricing strategies,
increasing financial inclusion, risk mitigation and gaining a
competitive advantage. Nearly all financial institutions surveyed
indicated that alternative data has increased revenue growth by at
least 15% and improved customer experience. The report indicated
that lack of alternative data usage could lead to lost opportunity,
customer friction and limited risk mitigation.
- Financial Institutions Satisfied Yet Challenged: There
is overall satisfaction with alternative data, though there are
challenges and barriers associated with utilizing alternative
credit data for credit risk assessment. Larger tier 1 banks are
significantly more likely than smaller banks to be very satisfied
with their data, as a result of having more resources to invest in
to obtain alternative types of data.
"The high rate of alternative data adoption across the customer
lifecycle reflects how lenders of all sizes are increasingly
unsatisfied relying solely on the status quo of traditional credit
data to grow and manage their businesses," said Kevin King, vice president, credit risk and
marketing strategy, LexisNexis Risk Solutions. "The vast majority
of institutions are now using alternative data to assess the
creditworthiness of subprime consumers and those with limited
credit history, while forward-thinking organizations are achieving
significant advantages applying these insights in near-prime and
prime segments. This benefits not only the financial institution
but the customer experience, helping to ensure lenders present the
most appropriate offers to consumers or SMBs, particularly those
who might not appear qualified through the lens of traditional data
alone."
LexisNexis® Risk Solutions Alternative
Credit Data Impact Report Methodology
LexisNexis Risk Solutions conducted its first nationwide survey to
assess the adoption and utilization of alternative data across
different financial institutions for credit portfolio management
and growth. Two phases of research occurred. The first phase
involved quantitative surveys; the second phase involved follow-up
qualitative interviews. Data collection was performed online and by
phone from July to August 2022 with a
total of 225 completions in the United
States. Respondents included senior decision makers for
lending and credit risk in U.S. financial institutions. Upon
completion of analysis with the quantitative findings, researchers
interviewed 10 consumer credit lending decision makers to provide
further context around certain survey results.
Download a copy of the State of Alternative Credit Data Impact
Report.
About LexisNexis Risk Solutions
LexisNexis® Risk Solutions harnesses the power of data and advanced
analytics to provide insights that help businesses and governmental
entities reduce risk and improve decisions to benefit people around
the globe. We provide data and technology solutions for a wide
range of industries including insurance, financial services,
healthcare and government. Headquartered in metro Atlanta,
Georgia, we have offices
throughout the world and are part of RELX (LSE:
REL/NYSE: RELX), a global provider of information-based
analytics and decision tools for professional and business
customers. For more information, please visit
www.risk.lexisnexis.com and www.relx.com.
Media Contact:
Marcy
Theobald
678.694.6681
Marcy.Theobald@lexisnexisrisk.com
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