How Alternative Data Can Help You Navigate Current Market Trends

In today's fast-paced market, lenders want to make informed decisions, expand their customer base, and improve customer experiences. Alternative data is a powerful tool to achieve these goals. It offers a deeper understanding of consumers beyond the credit score. Let’s explore the benefits of alternative data. 

Benefits of Alternative Data

1. Informed decision-making with reduced risk

Amidst market volatility, it is vital to expand marketable customer pools. But, risk must be managed to grow sustainably. Alternative data enables lenders to shift 8.4M more U.S. consumers into scorable bands without increasing risk.¹ 

Lenders can gain a competitive advantage in a tough economy by shifting unscorable consumers into scorable credit bands and prioritizing lower risk loan approvals.² In fact, a survey found that 41% of organizations view approving more loans with less risk as a top priority for the remainder of the year.

2. Opening doors to new customer opportunities

Alternative data empowers lenders to extend credit to previously underserved demographics. For instance, roughly 76 million U.S. consumers with little or no credit history can now be considered for loans. Of these consumers, 5% or 13.6M qualify for prime or near-prime offers.¹ 

3. Enhancing customer experiences through personalized approaches

Understanding customers beyond traditional credit scores lets lenders tailor financial products to their customers’ diverse needs. By incorporating utility and telco data , lenders can move an additional 6.5M people from unscorable to scorable.¹ This approach accelerates loan approvals and boosts overall customer satisfaction, addressing affordability issues while reducing friction in the application process. 

Navigating the Future with Alternative Data

As we progress through the second half of 2024, the strategic use of alternative data is key. It helps lenders navigate uncertainties in the industry. By combining alternative data insights with traditional credit data, lenders can make more informed, sustainable decisions while fostering positive customer outcomes. Whether mitigating risks, expanding market reach, or improving service delivery, alternative data can solve some of the biggest challenges lenders face today. Non-traditional data helps build a resilient and inclusive financial environment. For more information, read our ebook and read the first blog in this series.

Sources:

1. Expanding Access to Credit with Alternative Data

2. Equifax Data & Analytics, 2024