Creditinfo completes strategic acquisition of Ugandan and Namibian credit bureaus
Latest acquisitions cement credit expert’s position as leading solutions provider in Africa.
Kampala and Windhoek/London, 25th May 2023 – Creditinfo Group, the leading global service provider for credit information and risk management solutions, today announces the acquisition of two credit bureaus in Uganda and Namibia. As part of the acquisition, Creditinfo has taken on all employees working in the credit bureaus, which were previously owned by Experian. Creditinfo will combine their invaluable local expertise with its own extensive experience in delivering private credit solutions to African and European nations to help millions access finance.
Creditinfo has a unique mix of market knowledge that it will draw on to complement the work of the strong management teams already in place in Namibia and Uganda. Its experience working with more traditional lending markets in Europe combined with its knowledge of the different trends in lending markets in sub-Saharan Africa – such as the drive-in mobile wallet use in Kenya – will help both Namibia’s and Uganda’s credit bureaus go from strength to strength.
Coupling this experience with its advanced software and analytics products, Creditinfo will deliver its world-leading credit bureau solutions to help the two bureaus facilitate access to finance for both individuals, SMEs, and corporates in the regions, whatever their social and economic needs.
Paul Randall, CEO at Creditinfo said: “We are committed to sustainably growing our business and identifying ideal opportunities to add strong and profitable credit bureaus to the Creditinfo Group, while helping more local citizens and businesses access finance. Uganda and Namibia are ideal partners for us in this respect and all our new employees are a credit to the Creditinfo name. As the leading credit bureau provider in Africa, we eagerly look forward to working together to provide the best service possible in each country”.
Mark Charles Mwanje, Country Manager of Uganda said: “We are delighted to join the Creditinfo Group. We believe their years of expertise and knowledge will be a great asset to our existing team of dedicated and talented employees. We look forward to joining forces to help the local people and our growing economy.”
Karin Jansen van Vuuren, Country Manager of Namibia said: “Working with Creditinfo provides us the chance to tap into new opportunities for further growth. The company’s in-depth experience will be instrumental in helping banks and other lenders to extend credit, while ensuring we’re still a private credit bureau run by local people for local people, with all their best interests at heart.”
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About Creditinfo
Established in 1997 and headquartered in London, UK, Creditinfo is a provider of credit information and risk management solutions worldwide. As one of the fastest-growing companies in its field, Creditinfo facilitates access to finance, through intelligent information, software, and decision analytics solutions.
With more than 30 credit bureaus running today, Creditinfo has the most considerable global presence in this field of credit risk management. For decades it has provided business information, risk management and credit bureau solutions to some of the largest, lenders, governments, and central banks globally to increase financial inclusion and generate economic growth by allowing credit access for SMEs and individuals.
For more information, please visit www.creditinfo.com
Credit Bureaus and why they will remain important in the years to come
As the financial industry continues to evolve, credit bureaus need to continue to adapt. There are many compelling reasons why credit bureaus will continue to play a vital role in the future of lending and credit. In this blog, we’ll explore the benefits of credit bureaus and why they will remain important in the years to come.
1. Efficient and standardized credit data
Credit bureaus provide an efficient and standardized way to collect and store credit data. This allows lenders to quickly access the credit history and credit scores of potential borrowers, which is essential for making informed lending decisions. Without credit bureaus, lenders would need to spend more time and resources gathering credit data from various sources, which would slow down the lending process.
2. More accurate credit models
Credit bureaus are constantly refining their credit models to improve accuracy and predictiveness. By analysing large amounts of credit data, credit bureaus can develop more sophisticated credit models that consider a wide range of factors, such as payment histories, outstanding debts, and length of credit history. These models provide lenders with a more accurate picture of a borrower’s creditworthiness, helping to reduce the risk of defaults and delinquencies.
3. Increased access to credit
Credit bureaus play a critical role in expanding access to credit. By providing lenders with access to credit data, credit bureaus make it easier for individuals and businesses to obtain loans and credit cards. This is particularly important for people with limited credit histories or who have had past credit problems, as credit bureaus provide lenders with a way to evaluate these borrowers’ creditworthiness.
4. Protection against fraud and identity theft
Credit bureaus also play a key role in protecting consumers against fraud and identity theft. By monitoring credit reports for suspicious activity, credit bureaus can help detect and prevent fraudulent activity. Additionally, credit freezes and fraud alerts can be placed on credit reports to prevent unauthorized access to credit data.
5. Continued relevance in a changing industry
While the financial industry is evolving rapidly, credit bureaus will continue to be relevant in the future. As new technologies and data sources emerge, credit bureaus will adapt and incorporate these changes into their credit models. Additionally, credit bureaus will likely face increased competition from fintech startups and other companies, which will push them to innovate and improve their offerings.
In conclusion, credit bureaus are essential to the lending and credit industry. By providing lenders with access to credit data, credit bureaus make it easier for individuals and businesses to obtain loans and credit cards. Additionally, credit bureaus play a critical role in expanding access to credit, protecting consumers against fraud and identity theft, and adapting to a changing industry. As the financial industry continues to evolve, credit bureaus will remain a vital part of the lending and credit ecosystem.
Gary Brown,
Head of Commercial Development, Creditinfo Group.
Creditinfo Kenya partners with Letshego Kenya to launch lending app
Letshego Kenya launches “Letsgo Cash” in partnership with Creditinfo Kenya to take financial inclusion to a higher level.
· Minimum loan amount of KES 1,000 and a maximum of KES 100,000 and a loan repayment period of 30 days.
· LetsGo Cash increases access and supports customers who need quick and easy access to funds for emergency purposes.
· LetsGo Cash supports digital financial inclusion and enables the underserved and informal sector players to build their own credit records.
Nairobi, Kenya, 3rd May 2023 – Letshego Kenya Limited, a subsidiary of Letshego Holdings Limited (Letshego Group), has partnered with Creditinfo Kenya to launch LetsGo Cash, a self-service and short-term instant loan that gives customers access to KES 1,000 up to KES 100,000.
LetsGo Cash is payable in 30 days and geared towards consumers who need quick and easy access to funds for emergency purposes, including family emergencies, medical needs, home repairs, car breakdowns or funds to support entrepreneurs and small businesses. Creditinfo Kenya’s team brings decades of experience and practical knowledge in credit risk management to support the delivery of LetsGo Cash.
Letshego Kenya’s Chief Executive Officer, Adam Kasaine said: “LetsGo Cash is another way we are increasing access to product funds for more Kenyans. This is inclusive finance in action – it’s quick and hassle-free cash at a competitive price, accessible via your phone or web.”
The innovative LetsGo Cash is a potential game-changer, as it is accessible anytime, anywhere and is more competitive than traditional short-term cash advance providers, providing customers with immediate financial relief and the opportunity to participate in the digital economy in a sustainable and responsible manner.
Creditinfo’s Regional Manager for East Africa, Kamau Kunyiha added: “Creditinfo is proud to support LetsGo Cash assist customers who need quick and easy access to emergency funds the most, while also helping the underserved to build their own credit scores at the same time. Customers’ applications are submitted with a few swipes on a mobile phone, and the time to cash can be as short as a few minutes.”
LetsGo Cash provides a convenient, safe and affordable financial service to the underserved and informal sector players thereby helping to increase financial inclusion. It also helps them build their own credit record, since the better they manage their loan, the better their credit record, and the more cash they have access to going forward. This ensures that more people can access the service, including first-time borrowers who can now enjoy the benefits of a secure, regulated lending solution. Once approved, the money is disbursed directly into the customer’s mobile wallet. It can then be used as the customer desires, including for emergencies, such as purchasing prepaid electricity and water, paying bills, or sending money to friends and family.
LetsGo Cash can be accessed on Letshego’s LetsGo Digital Mall and downloadable via Android and Apple Play Store, or with one click, clicking on www.letsgo.letshego.com as well as via the USSD *435# on their mobile phone.
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NOTES TO EDITORS:
About Letshego Kenya Limited
Letshego Kenya Limited is the largest credit-only microfinance institution in Kenya and a licensed financial services provider in Kenya, providing loans to individuals across both the public and private sectors, as well as supporting Micro and Small Entrepreneurs (MSE). Since the conclusion of the successful acquisition by Letshego Holdings Ltd in February 2012, Micro Africa Group became a wholly owned subsidiary of Botswana-based Letshego Holdings Limited – an inclusive finance group with more than 21 years’ experience in Africa, and a current footprint of 11 Sub-Saharan Markets. Its contribution to the group has been to leverage the microfinance banking competencies and existing customer base, expand Letshego’s geographic coverage, and diversify its solution offering.
The company is founded on, and continues to strive towards, the principle of finding the most effective way to implement microfinance banking in an African context and transform the livelihoods of customers who carry out viable economic activity. Letshego Kenya Limited has a staff compliment of over 150 employees, spread across 25 branches. The company provides loans to over 20,000 customers who enjoy an expanded access through strategic partnerships, innovative technology and digital delivery channels. For more information on Letshego, please visit www.letshego.com/kenya
About Creditinfo
Established in 1997 and headquartered in London, UK, Creditinfo is a provider of credit information and risk management solutions worldwide. As one of the fastest-growing companies in its field, Creditinfo facilitates access to finance, through intelligent information, software and decision analytics solutions.
With more than 30 credit bureaus running today, Creditinfo has the most considerable global presence in the field of credit risk management. For decades it has provided business information, risk management and credit bureau solutions to some of the largest, lenders, governments and central banks globally to increase financial inclusion and generate economic growth by allowing credit access for SMEs and individuals.
For more information on Creditinfo, please visit www.creditinfo.com
The Role of Artificial Intelligence and Machine Learning in Credit Scoring
Executive Summary
The use of artificial intelligence (AI) and machine learning (ML) in credit scoring is revolutionizing the lending industry. By leveraging vast amounts of data and advanced algorithms, lenders are able to more accurately predict credit risk, improve operational efficiency, and expand access to credit for underbanked individuals and small businesses. This white paper explores the benefits and challenges of AI and ML credit scoring, and provides guidance for lenders on how to successfully integrate these technologies into their lending processes.
Introduction
Traditional credit scoring models rely on a limited set of data points, such as payment history, outstanding debt, and length of credit history, to assess creditworthiness. These models are effective for many borrowers, but they can be limiting for individuals with thin credit files or non-traditional sources of income. AI and ML credit scoring models, on the other hand, can analyze a vast array of data points, including non-traditional data sources, to develop a more accurate and comprehensive picture of a borrower’s creditworthiness.
Benefits of AI and ML Credit Scoring:
1. Improved accuracy: AI and ML algorithms can analyze a wide range of data points, including non-traditional data sources such as social media activity and utility bill payments, to develop a more accurate picture of a borrower’s creditworthiness. This can result in more accurate credit scores and better loan decisions.
2. Expanded access to credit: Traditional credit scoring models can be limiting for individuals with thin credit files or non-traditional sources of income. By analyzing a broader range of data points, AI and ML credit scoring models can expand access to credit for underbanked individuals and small businesses.
3. Increased efficiency: AI and ML credit scoring models can automate many aspects of the lending process, reducing the need for manual underwriting and improving operational efficiency. This can result in faster loan decisions and a better borrower experience.
Challenges of AI and ML Credit Scoring:
1. Data privacy and security: As AI and ML credit scoring models rely on vast amounts of data, data privacy and security are critical concerns. Lenders must ensure that they are collecting and using data in compliance with applicable laws and regulations, and that they have robust cybersecurity measures in place to protect sensitive borrower data.
2. Bias and discrimination: AI and ML algorithms are only as good as the data they are trained on, and if that data is biased, the algorithms can perpetuate that bias. Lenders must be mindful of potential biases in their data and take steps to mitigate any potential discrimination in their lending decisions.
3. Explainability: AI and ML algorithms can be complex and difficult to interpret, which can make it challenging for lenders to explain their lending decisions to borrowers. Lenders must be able to provide clear explanations of their credit scoring models and lending decisions to borrowers.
Conclusion
AI and ML credit scoring has the potential to revolutionize the lending industry, providing more accurate credit scores, expanding access to credit, and improving operational efficiency. However, lenders must be mindful of the potential challenges, including data privacy and security, bias and discrimination, and explainability, and take steps to mitigate these risks. By investing in AI and ML technologies and developing robust risk management practices, lenders can successfully integrate these technologies into their lending processes and provide better loan decisions and a better borrower experience.
Samuel White
Director of Direct Marekts, Creditinfo Group.
ESG and the Banking Industry: Why Sustainability Matters
As the world grapples with environmental and social challenges such as climate change, social inequality, and governance failures, the importance of ESG (Environmental, Social, and Governance) considerations has never been more apparent. For banks, ESG is becoming an increasingly important aspect of doing business, as it can help to manage risks, enhance reputation, meet regulatory requirements, drive innovation and increase access to capital. In this blog post, we’ll explore each of these points in more detail.
- Risk management: ESG risks are significant and multifaceted, ranging from physical risks such as climate change-related natural disasters to transition risks stemming from legal and policy risks from greenhouse gas emissions and governance or social issues such as human rights abuses. By integrating ESG considerations into their risk management frameworks, banks can better anticipate and manage these risks, which can have a positive impact on their financial performance. For example, banks that fail to properly assess and manage climate-related risks could face stranded assets or lawsuits, which could impact their bottom line. Regulatory frameworks in Europe have taken note of this and the European Banking Authority now requires banks to disclose multiple data-points regarding ESG risks in their risk reports (Pillar III).
- Reputation: ESG is increasingly important to customers, investors, and other stakeholders who want to see banks acting as responsible corporate citizens. Banks that take ESG seriously and demonstrate their commitment to sustainability and social responsibility are more likely to attract and retain customers, as well as to access funding from ESG-focused investors. For example, a bank that invests in renewable energy projects or supports social programs in its local community is likely to be viewed more favorably than a bank that does not prioritize ESG. Mismanaging ESG factors to increase reputation may have negative effects, which became evident in some high-profile cases in 2022, both in the EU and US.
- Regulatory pressure: Regulators around the world are increasingly focusing on ESG issues and requiring banks to integrate these considerations into their business practices. For example, the European Union has introduced regulations such as the Sustainable Finance Disclosure Regulation (SFDR) and the Taxonomy Regulation, which require banks to disclose ESG-related information and align their investments with environmental objectives. Banks that fail to comply with these regulations could face fines or other penalties, which could impact their financial performance, reputation, and limit access to capital.
- Innovation: Banks that prioritize ESG are more likely to drive innovation and develop new products and services that address environmental and social challenges. By supporting the transition to a low-carbon economy and promoting social inclusion, banks can help to create a more sustainable and equitable future. For example, a bank that issues green bonds or sustainable investment products can help to finance renewable energy projects or other environmentally beneficial initiatives, potentially at better rates. Similarly, a bank that offers financial services to underserved communities can help to promote financial inclusion and social equality.
- Green bond issuance offers several benefits for banks, such as accessing a growing pool of socially responsible investors, improving their reputation as sustainable financial institutions, and supporting the transition to a low-carbon economy. The growth of the green bond market has been impressive, with a record-high issuance of $269.5 billion in 2021, up 4.6% from 2020. The cumulative issuance from 2007 to 2021 surpassed $1.5 trillion, with the US, China, and France being the largest issuers. The increase in green bond issuance is driven by investor demand and regulatory measures promoting sustainable finance.
In conclusion, ESG considerations are becoming increasingly important to the banking industry to manage risk, enhance reputation, meet regulatory requirements, and drive innovation. Banks that prioritize ESG are likely to be better positioned for long-term success, as they can help to create a more sustainable and equitable future for all stakeholders. As individuals, we can also play a role in promoting ESG considerations by supporting banks and financial institutions that prioritize sustainability and social responsibility. By working together, we can help to build a more resilient and sustainable global economy.
This may be one of the most important feature of ESG in banking, where the green bond space has grown exponentially over the last years.
By Gary Brown
Head of Commercial Development – Creditinfo Group.
The Know Your Customer (KYC) world and Creditinfo’s role in it.
The acronym KYC stands for three very simple and understandable words – Know Your Customer. But the meaning of the processes and expectations behind those three letters are most often not so simple and straightforward, as whoever must deal with this today already well-known acronym, knows that the world and the industry behind this magical acronym, is already vast and growing every day.
KYC in very essence means that you must have understanding and information of the background of your customer. Often this information is divided into three basic categories:
- Identification of the persons connected or operating behalf the customer.
- The field of activity or daily business including the understanding of the origin of the customers funds.
- The understanding if customer possesses certain risks while having any business relationships with him.
Mainly this sort of detective work is required in the purpose of mitigation the risks in anti-money-laundering/fight against terrorism financing (AML/CTF) but it is also relevant in the process of imposing international sanctions as sanctioned persons are interested that their business interest would remain undiscovered.
Even companies that are not subject to AML regulation need to ensure that they stay out of trouble caused by risks that are risen because of partners or clients with fraudulent, criminal, or sanctioned background, as this may result with loss of revenues/funds, bad business reputation or fines by authorities.
So therefore, it is essential for market entities to trust their business affiliates and therefore they need to verify that everything is OK with their customers and threat of the damage caused by realization of different risks, is minimized.
What is happening in Europe to strike this conversation now?
One very practical side for knowing your customer is to be sure that you’re not violating any sanctioning regime in force. Sanctions and sanctioning regimes may not be familiar to all of us who we just are involved our day-to-day business, but this obligation is something we all must know and follow. International sanctions are seen as sort of political means for influencing certain group of entities, jurisdictions, or organizations to behave in line to accordance with the international human rights, rules of law and territorial integrity. Sanctions are imposed in a way that all private and legal entities are obliged to fulfill them, authorities who are imposing them are usually international organizations (EU, UN) or state governments.
As Russia launched massive war campaign in Ukraine in February 2022 and has performed several actions against Ukraine’s territorial integrity already from year 2014 this kind of behavior has naturally found a reflection from EU by imposing sanctions. As from 2014 there was already two regimes in force (regulations EU No 269/2014 and No 833/2014) it was easy on 2022 to EU to add several sanctioning updates (altogether by 8 packets) against Russia (and Belarus).
As the conflict remains in Ukraine and also as there are several war crimes discovered performed by Russian troops during the occupation of Ukraine, we can be more than certain that EU will impose more updates to Russian sanctioning regimes. This only intensifies the need for market entities to have a clear understanding on what are the situation regarding the restrictive measures in force and where to find that information.
How is CREDITINFO playing a role in this?
Mitigating the risks is always the question of having updated and trustworthy information that person must have for making decisions and enforcing correct procedures. Regarding risk mitigation and imposing enforced sanctioning regimes clients often face themselves in front of different questions –
- What exactly do they have to do?
- How do they do it?
- Where can they find help and trustful partner for this?
- Are the solutions for doing it comfortable and simple to use?
- How expensive is it?
Providing both, the trustworthy information from respectful sources and the solution for being compliant in the regards to that obligation (by using Creditinfo-offered solution) is one of the ways of building up successful client relationship in KYC sector (obligations in KYC area may differ depending on the AML/TFC and imposing sanctions viewpoint). KYC procedures regarding sanctions can be divided into two different service blocks:
- Identifying the persons behind and connected to legal entity.
- Easy to use, reliable screening solution for determining whether there are imposed sanctions or not.
It is important to have flexible products in place for meeting the needs for most of the market entities as clients tend to prefer to order all the solutions from one place. For example, clients may have the need only for determining certain persons connected with legal entities (like UBO’s), other clients may only need data sources for setting up internal screening procedures for their inter-company use, while others are just willing to outsource everything (analysis, data and screening).
Lastly, instead of being in the last mile lets be the first! As already mentioned, there are different market entities who are operating in KYC business, and they are all seeking for cost efficient and trusted data sources for providing best data quality with best price to their customers. Creditinfo Group’s presence in several different countries, with the direct access to local state registry information or other base data source in those countries therefore makes us one of the trusted partners for well-known global companies.
KYC products are in process of continuous development and as the needs for our clients change, we need to align our services accordingly. If there are ideas, proposals, or questions, please feel free to reach me via email – urmas.pai@creditinfo.com
Urmas Pai
KYC & Fraud Global Product Manager
JSC “International Bureau of Credit Histories” launched the chatbot “MBKI online” in order to provide Ukrainians and migrants from Ukraine with access to their credit histories.
Lending is one of the main elements of the modern financial system. In one way or another, most people rely on loans from banks – whether these are credits, mortgages, installments, credit cards to pay for critical goods and services. An important role in this process is played by credit bureaus that collect, store, process and transmit information on borrowers’ payment discipline, credit scoring and current obligations.
However, when people move to a new country or are forcibly evicted from their homes due to occupation or fleeing war – this is what many Ukrainians are currently experiencing – it becomes much more difficult to access financial and other services. This unfortunately disadvantages refugees and adds to the problem regardless of whether they had good or bad credit history before.
Aiming to resolve issues related to solvency confirmation of the tenant from Ukraine and checking the credit history of Ukrainians when applying for a loan or employment, JSC “IBCH” (one of the largest Credit History Bureaus in Ukraine, a member of the international Creditinfo Group since May 2021) created the “MBKI online” chatbot.
For more than 16 years IBCH (Creditinfo Ukraine) has been cooperating with the largest banks and non-bank financial institutions, including foreign financial institutions and credit bureaus of other countries. The organization is now focusing its attention on supporting Ukrainians, both in Ukraine and abroad, with getting access to credit reports.
Kateryna Danylchenko, CEO of JSC “IBCH” (Creditinfo Ukraine), stated, “Since the beginning of the war in Ukraine, over 6 million people – including myself, my fellow colleagues and partners– have been forced to leave the country at short notice with no idea if or when they will return. Displaced Ukrainian refuges face a whole host of challenges without necessary documentation or access to registries. While JSC “IBCH” (MBKI, Creditinfo Ukraine) became the first Ukrainian bureau to launch cross-border data sharing with bureaus from 5 countries, it is also important to assure easy and mobile direct-to-consumer gate to credit history reports. “MBKI online” is so important in helping Ukrainians staying in country and abroad gain online access to their credit histories (also in English), so they can prove their ability to make payments on time to landlords or new employers, follow their credit history updates and bureau score change, as well as to report about lost identification documents.”
“Creditinfo was set up to aid financial inclusion through making credit information more easily accessible and digestible for borrowers and lenders.” – comments Paul Randall, CEO Creditinfo Group. “I’m so glad that there’s something practical we’ve been able to do to help Ukrainian refugees across Europe to access financial services. The creation of this chatbot is an important development in our journey to make the lives of everyone forcibly displaced by this war that tiny bit easier.”
The “MBKI online” chatbot, available on Viber and Telegram, gives Ukrainians access to their own credit history and offers an easy way of identification including using BankID.
Chatbot enables the customer:
• To get a certificate about credit history (in Ukrainian and English);
• To find out personal credit score;
• To get answers to basic questions about credit history;
• To inform the Bureau about the loss of a passport or other identity document;
• To ask for a loan and find out available offers.
Chatbot accepts different payment methods (including bank card, Apple Pay and Google Pay). For more information and to start working with the service, follow the link: https://credithistory.com.ua/bots/
The fintech movement in the banking industry
Is fintech an enabler or disruptor in the banking industry? Fintech the new technology that improves and digitalizes the delivery and services of the banking industry. These solutions can include software helping connect with customers, businesses, and banks through agile processes to manage financial services better. Or better use of data to offer a more personalized and customer centric offering.
The lending landscape has gone through some major changes in recent years, and this shift does not appear to be slowing down. Based on the latest information from the World Bank, about 76% of adults have a bank or mobile account, this is up from 51% in just over a decade. The rise of mobile money solutions, which allow users to turn their smartphones in digital wallets and use it to pay for services, have played an important role tapping into the unbanked segment and supporting this improvement.
Fintechs are realizing the opportunities to disrupt the challenges faced by traditional banking and offering new solutions that better suit the needs of customers and businesses. By embracing technology, fintech companies can collect and store more data on customers so they can offer personalized solutions with greater choice of products. Unlike traditional banks, fintechs can move with speed and deliver digital solutions improving the user experience.
The increase in fintech players has increased competition between traditional banks and fintechs. Traditional banks are paving the way to collaborate with fintechs while others are implementing teams to focus on in-house projects. Older generation customers may value trust over the latest trends and will therefore remain loyal customers to traditional banks., However, younger generations will demand more and swifter solutions because that is what they are familiar with. Traditional banks embracing fintech solutions will see them provide the flexible solutions that customers are looking for.
One of the biggest reason the banking industry has adapted to fintechs, is due to their ability to connect with customers 24/7 through an omnichannel approach. This not only increases customer reach and convenience but also allows banks not to rely solely on customers visiting a branch.
It is expected that we will continue to see changes in the banking industry for years to come, the speed of change will depend on how much and how fast customers continue to adapt to fintech solutions. It’s clear, traditional banks are no longer the monopoly in this industry, with more digital banks, neo– banks and new players such as telcos and payment companies entering the lending landscape. Nobody is expecting the traditional banks to be replaced but it is likely that banks and fintechs partnering with one another will allow the traditional banks to enhance technologies and by coming together both the fintechs and the banks can benefit in this highly competitive market.
Samuel White,
Direct Markets Director, Creditinfo Group.
Evolution of customer onboarding and risk assessment
This year, Creditinfo celebrated its 25-year anniversary, so I decided to look back on how the landscape in effective credit risk management has evolved.
While it was a little before my time, I’m sure there are still many people today who remember that the only way to open a bank account, apply for a loan or to be considered for a mortgage was to visit your local branch and sit with a loan officer. Though, this is still the case in many emerging markets even today, there will be some small differences on the data used and the risk assessment criteria that is in place.
Historically, a visit to the branch would involve meeting a loan officer who would then try to understand your circumstances before making an approval. If there was a past relationship or a connection (family member, friend, etc) with the loan officer, this would usually work in your favor. It was a direct relationship that usually lasted a lifetime. The loan officer would know or at least try to understand as much personal information on your employment, income, and expenses as possible and then would make a personal judgement to provide you with a form of credit. All of this was most likely completed and documented on papers and filed into a filing system for record.
Fast forward a few decades and not only are local branches disappearing, but also the idea of sharing personal information with a “stranger”, along with any supporting documents that validate your circumstances are a thing of the past. In a world of smartphones, tablets, and access to the internet 24/7, we have moved to a new wave of digital lending.
Lenders are implementing new strategies today to meet the end needs of customers by enabling access to credit instantly at their fingertips. Digitalization has become the new norm in lending and to succeed today, lenders need to adjust and transform their platforms. It is now a thing of the past to fill in an application form on paper when we have a smartphone in our pockets that can allow us to fill in the same information into a mobile application within a few minutes. As part of the loan onboarding, we can now validate our identity through biometric authentication options – fingerprint analysis, selfie/face recognition and document validation, etc. eliminating the need to do human to human verification.
The challenges from old-fashioned lending methods, i.e. understanding family ties or seeking information on employment and income would typically result in an unfair and inaccurate risk assessment. With the vast amount of information available today, either traditional or non-traditional, we can accurately assess everyone, even customers with limited credit history – “thin files”. These are often rejected due to the lack of evidence on how risk-tolerant or risk-averse they are. Usually, the absence of traditional information for these customers creates a challenge for them to receive the financial support they need. With the introduction of psychometric data, e-wallet data or open banking solutions, lenders can combine credit scoring methods with traditional models to provide accurate and reliable risk assessment.
The benefits and success of this digital transformation and innovative approach to lending is not just about delivering quick-fix money solutions. Instead, it is about empowering individuals, facilitating access to credit and growing our global economies.
If you are interested to reach the top and win the digital race with a state-of-the-art digital lending platform then reach out to Gary Brown, Commercial Director, Creditinfo Group.
Visit www.creditinfo.com for more information.
Paving the way for a brighter future through SME lending
Developing modern solutions and removing barriers, paves the way for a brighter future through SME lending
SMEs (Small and Medium-sized Enterprises) are known as one of the biggest business sectors in each economy, being important contributors to job creation and global economic development. They create more than 50% of employment worldwide.
SMEs have gained importance in developing economies. Although SMEs have some weaknesses, they are less affected by economic crises due to their flexibility and ability to keep up with changing conditions. SMEs are vital establishments to create an effective innovation ecosystemThis is shown by recent studies that SME’s can contribute to over 55% of GDP and over 50% of total employment.
SMEs can find it increasingly difficult to borrow money from traditional banks because of strict requirements. It is often seen that SMEs are riskier than large institutions as it is difficult for banks to evaluate them in the same way since they often do not have solid accounting systems. This difficulty in assessing their creditworthiness often impacts the bank’s ability to provide affordable credit. As a result, many SMEs are forced to look at alternative solutions such as expensive credit lines charging high interest rates or offering costly collateral. Neither of these options are sustainable for small businesses.
SMEs need fast decisions and a more agile, digital approach. This is where Creditinfo and local Fintechs are working in collaboration to support the sector. Together, we specialize in using technology to quickly assess each SME’s entire data footprint and then provide tailored financial solutions. Based on our experience in Africa, we can assess the credit risk an SME poses by using real-time data from multiple sources, including e-wallets, credit bureaus and credit scores. The traditional method, consisting of manual processes and hard copies, is now an outdated approach in the digital world.
Digital SME finance, using alternative data, offers an extraordinary opportunity for addressing some of the challenges. Every time SMEs and their customers use digital services, conduct banking transactions, make or accept digital payments, use their mobile phones, or manage their receivables and payables through a digital platform, they create alternative data. This real-time and verified data can be analyzed to determine both capacity and willingness to repay loans.
Specific SME assessment methodology can also be applied. For example, small companies tend to have a greater level of owner centricity. Therefore, blending business and personal data can enable the development of highly predictive blended scorecards that utilize the payment behaviour of business owners and managers and company credit data to produce a more comprehensive risk assessment.
Help is also needed from Central Banks to continue to support this sector. We are seeing reforms happening globally where Central Banks are implementing mandates for all banks to lend a set percentage of their credit portfolios to SMEs. Boosting the availability of finance for the SME sector, the reforms aim to ease the flow and reduce the high cost of credit to a sector that is considered an engine of growth for the future.
SME lending is rapidly growing, and by putting the customer needs first and using new solutions and data, we can begin to shift the status quo. Globally there is a shift toward digital lending solutions, which can support a level playing field for SMEs. By transforming this lending sector as a whole, we can make it more accessible for small businesses to grow and continue making a difference.
Joe Bowerbank – Business/Commercial Development, Creditinfo Group.
