84% lenders use both traditional, alternative data to underwrite borrowers

More than eight out of 10 lenders in the country use a combination of traditional and alternative data to underwrite their customers, using sources such as credit bureau reports, location and SMS data, payment transaction behaviour and third-party app usage, among others.

 

Only 3 per cent of such lenders rely on alternative data alone to make a lending decision, according to data from the Fintech Association for Consumer Empowerment (FACE), a fintech self-regulatory organisation (SRO-FT).

 

Alternative data includes insights such as phone usage, utility payments, e-commerce transactions, social media activity, employment history, and in some cases, email and SMS data.

 

While traditional data sources such as credit bureau reports and income verification documents continue to dominate, other emerging alternative sources such as location data, SMS data and third-party app usage are being increasingly used by companies.

 

Risk assessment, know-your-customer (KYC) verification and fraud detection drive the need to use alternative data in India.

 

Sources of data used in underwriting retail loans

 

Credit bureau reports: 70%

 

Income verification documents: 67%

 

Fixed obligation to income ratio: 60%

 

Location data: 57%

 

SMS data: 40%

 

Employee verification documents: 40%

 

Payment transaction behaviour: 37%

 

Third-party app usage data: 33%

 

Source: Fintech Association for Consumer  Empowerment (FACE)