BSP: Alternative data in credit scoring to improve access to financial services
THE USE of alternative data in assessing borrowers’ capacity to pay their debt could help unbanked and underserved Filipinos gain access to financial services, the Bangko Sentral ng Pilipinas (BSP) said.
“With alternative data, a more complete picture of the client is painted thus allowing for more individuals and businesses to be assessed,” BSP Governor Benjamin E. Diokno said during a webinar by the FinTech Alliance Philippines and TransUnion.
Alternative user information is gathered from social media, mobile data, utilities data, behavioral data, online transactions, geolocation data, and browser data, among others, the BSP said.
Currently, only bank transactions and credit bureau information are used to assess a borrower’s ability to pay their debt.
“The use of alternative data for credit scoring is just one example of how data can be used to benefit consumers. Looking ahead, we must continue to take initiative in fostering an inclusive digital financial ecosystem,” Mr. Diokno said.
The central bank said the use of alternative data for assessing creditworthiness will be helpful for Filipinos and small businesses that do not have a formal credit history.
Customer profiling, improved loan pricing, and lower default rates were cited as benefits of alternative data usage, according to respondents of a central bank survey in September.
Mr. Diokno said this reflects significant potential for alternative data, although it took an average of two years before benefits were realized.
Alternative data usage will help Filipinos that are part of the gig economy as well as farmers to have access to credit, Ellen Joyce L. Suficiencia, director of the BSP Center for Learning and Inclusion Advocacy, earlier said
Ms. Suficiencia noted that data from the Credit Information Corp. showed less than 50% of the adult population has a credit record.
Meanwhile, the BSP has also been working on a credit risk database which is backed by the Japan International Cooperation Agency. The project is aimed to help banks evaluate the creditworthiness of small businesses and prevent lenders from requiring excessive collateral cover. — L.W.T. Noble
