Credit Access is one of the fundamental enablers for faster economic growth and reduced income inequality. In India, the credit to GDP ratio stands around 50% which is significantly lower as compared to the developed economies and other BRICS nations. Today, approximately 525 million customers in India have no access to formal credit from regulated financial institutions. These individuals depend on informal mechanisms for saving and protecting themselves against risk.
The major impediments for financial institutions for serving these segments are –
Insufficient credit history – Most of the unbanked consumers have either never taken a loan or have a thin file history. The bureau records used by financial institutions are available only for 20% of the Indian population. Consequently, more than 50% of the applications are rejected every year which include even small ticket unsecured loans. Majority of these consumers are comprised of rising middle class & young millennials with a potential borrowing capability of $600 billion within the next 5 years as per PwC analysis.
High cost of service – Huge amount of documentation, third party resource utilization and lengthy processes makes it difficult for financial institutions to tap creditworthy consumers from first time borrowers requiring unsecured loans for short durations and small amounts.
High cost of sales – High cost of frontline resources, cut-throat competition and thin operating margins leave little room for financial institutions to play around with resource deployment. Therefore the focus remains on reinforcing existing customer relationships for credit deployment and new segments are largely left unexplored.
Trustscore – next generation credit score from CreditVidya
Trustscore is new credit score for underwriting first-time borrowers using non-traditional digital footprints. It empowers businesses with a capability to leverage 10000+ data points with AI frameworks for comprehensive customer profiling and risk assessment.
Trustscore captures alternate data by device, browser and social media fingerprinting. The unstructured data undergoes multiple enrichments to estimate positive and negative influencers on a scale of 100 to 1000. The negative influencers include network ignorance, defaults on utility payments, financial instability and high merchant interactions. The positive influencers on the other side include travel logs, communication logs and social outreach. CreditVidya’s AI-based frameworks combine these influencers to generate an accurate predictive modelled statistical output.
Benefits for financial institutions
– Comprehensive approach for risk assessment of first-time borrowers
– Create future ready underwriting capabilities for a digital-first world
– Factor in recent positive and negative events as well as behavioural patterns
How are financial institutions using Trustscore in India?
With a simple integration of an SDK in an existing application or web interface, financial institutions get ready within a few weeks to use Trustscore. Today 20+ Banks & NBFCs in India are leveraging CreditVidya’s alternate underwriting solutions and over 5 million consumers have been assessed till date. Financial institutions are working on creating alternate data-based credit policies for multiple unsecured loan products like personal loans, credit cards, consumer durable loans and two-wheeler loans.
With increasing internet penetration, smartphone usage, India stack and multiple government initiatives for digital India, credit landscape is set to move from data poor to data rich.
Alternate data-based scoring is set to transform credit underwriting.
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