Alternative credit scoring partnerships help fintech companies lend better

Financial technology companies have partnered with credit scoring companies to enable faster and more efficient lending. Online lending marketplaces Rubique and Bankbazaar said their partnerships with credit information companies Experian and CIBIL, respectively, to offer free credit reports to customers, made their lending more efficient. “Our credit report partnership with CIBIL, as well as our proprietary credit score which blends alternative and conventional data, has helped us move from a blended approval ratio of 40-45 percent a year ago to around 65 per cent approval ratio now, said Manav Jeet, managing director and chief executive, Rubique. Bankbazaar’s year-old partnership with Experian increased the chances of approval of loan for its customers. “The credit report makes an individual aware of her own score and thus enables her to decide if it’s the appropriate time to apply for a financial product. If the person has a bad credit score, she can now choose to wait and improve her credit score before applying for a loan,” said Navin Chandani, chief business development officer, Bankbazaar. While both Rubique and Bankbazaaar do not lend on their own books, they saw a marked difference in loan approval ratio of their customers. “These partnerships play a key role in bridging the demand-supply gap. As a result, it helps the lenders provide credit where it is due, while keeping the risk at minimum,” said Vaishali Kasture, managing director, Experian Credit Bureau. Online payment service provider PayU, and Germany-based fintech company Kreditech recently partnered to provide instant loans for online purchases. “Customers can make a real-time decision as to whether they want to take a loan to buy a particular product and they would have customized loan options available to them, with rates based on their credit score,” said Shailaz Nag, Managing Director and Co-Founder, PayU India. While PayU is in charge of distribution and providing consumer spends data, Kreditech lends on its books and provides the credit score. PayU invested EUR 110 million in Kreditech and this was the first of many lending partnerships between the two, said Nag. Private sector lender RBL Bank has partnered with alternate data company Credit Vidya on two accounts – verifying salaried customers data and providing alternate additional data of customers. “Our partnership with Credit Vidya is for providing us with alternate additional data like spending patterns, bank statements and more from the consumer’s phone with her consent,” said Harjeet Toor, Head – Retail, Inclusion and Rural Business, RBL Bank. While the bank is still testing the impact of its partnership for the credit model, it said that Credit Vidya’s technology provided a cheaper and faster way of verifying a customer’s place of employment. “Our platform that onboards a customer can be integrated with the FinTech companies within 8 -12 weeks timeframe.

The entire process is digitized to reduce the cost of operations and to bring speed and scale in the lending process”, said Rajiv Raj, Co-founder and director, CreditVidya. “CreditVidya is able to provide alternate data using technology we have not developed so far. We can use this data to further refine our existing credit scoring model,” said RBL Bank’s Nag. Both Experian and CreditVidya said that alternate data is most beneficial for assesement of new – to-credit customers for whom centralized or structured data is not available. “This segment today uses mobile, internal and social media extensively and hence, leave their digital footprint. We can use this digital footprint to understand customer profile more in detail and thereby, provide them credit at early life-stage”, said Experian. “CreditVidya works as credit enabler for leading lending institutions and looks at numerous data points on customers to assess customers’ risk, authenticate and check frauds. Here we check ability, intend and stability of the customers using alternative data,” said Raj. “CIBIL score helps us understand a customer’s intention to pay as it tells if a person has defaulted on any loans before. Alternate data points like travel size, ecommerce shopping, other spends and telecom bills help to understand the consumer behavior and consistency in terms of payment and serves as a validation, said Rubique’s Jeet. While bank statements require consent from the customer, a lot of data like telecom bills and e-commerce can be pulled shopping from direct sources, he added.