SPARK 2017 Recap: The Infinite Possibilities of Alternative Data

The secret is out: alternative data is quickly becoming a well-proven resource for the financial services industry, and at this year’s SPARK conference, industry thought leaders covered a range of relevant topics on the breadth of its impact as it becomes more mainstream in the financial services industry. Check out some of the key findings from the newest addition to SPARK’s talk tracks:

The Big Three Chime in on Alternative Data

In the Data Smackdown: Alternative vs. Mainstream panel discussion, the “Big Three” credit bureaus chimed in with their thoughts around the use of alternative data, like Utility Data, over mainstream data in credit scoring. Mike Mondelli, SVP of Alternative Data, TransUnion; Melinda McBride, Business Development & Innovation Leader, Equifax; and Mike Pecen, Head of Product and Platform Strategy, Experian took a hard but hopeful look at using alternative data in the credit industry.

The panel, moderated by eCredable CEO Steve Ely, agreed that advances in technology and accessibility make alternative data a viable option, although it may be some time before traditional bankers rely on it, since for certain use cases like consumer disputes hard data is more relevant.

One major challenge facing the acceptance and mainstream use of alternative data for credit scoring is consumer permission. “The trickiest issue is getting a consumer’s permission to use that alternative data,” said Mike Pecen from Experian.

“On the demand side there’s a good case to use this type of data. It can help break into new markets and help millions of underbanked or unbanked consumers,” he continued.  “On the supply side, however, there has to be a reason. We eventually have to boil it down to trust and incentive.”

Giving consumers an incentive, such as a more efficient approval process, piques the interest of younger generations who may tend to fall in the under- or unbanked group. This, along with establishing trust by ensuring credential security, will help the case for a more mainstream acceptance of alternative data in the credit scoring process, according to the panel.

Financial Inclusion: Leveraging Credit Data for Social Good

Kevin King, Director of Product Marketing, ID Analytics/Symantec shared a wealth of statistics that ultimately explained how analytics and alternative data can create a more complete picture regarding the creditworthiness of the 100 million consumers that have no score or a reliable score. Some key highlights included:

• Credit inclusion is a real challenge, but has serious opportunity. Nearly half of consumers lack a credit score needed to access traditional credit products – though many are worthy.
• Alternative data, such as utility data, can help the unbanked population as well. Between 1-10% of applicants are creditworthy, and can be effectively identified with alternative insights from markets like telecom (cable, cell phone, etc.).
• Alternative data can help with low score consumers. Between 4-10% of all applicants are creditworthy despite low scores, and can be effectively identified with alternative data.

The Infinite Opportunities of Persistent Data

Spencer Robinson, Head of Strategy at Kabbage, brought us a unique view of the infinite opportunities available with alternative data. According to Robinson, snapshots of data often don’t allow for accurate predictions, but continuous connections create context that allows for more strategic and impactful choices.

Robinson continued to present, with an ongoing stream of data, we can be infinitely better at understanding customer actions. For example, in the credit world, utilizing persistent data helps businesses create a baseline for their customer’s actions, and because the data is constantly streaming, companies can appropriately begin benchmarking data and producing trends on customer actions.  

Continuous alternative data, like utility bill payment history, gives lenders a more thorough insight into who their customers are, and how they can help. And by understanding the customer better, lenders can create better engagement and more transparency into their loan approval or denial process.

“If you speak with a customer and tell them what you’re going to do, and why, they will more than likely be okay with it,” said Robinson.

Given the importance of customer engagement, this type of information supports more thorough discussions on the right product for the right business at the right time along with a ready transparency.

Overall, these discussions highlighted the importance of alternative data, like utility data, in the financial services industry. By incorporating and utilizing this type of data, companies have the ability to make more strategic decisions, increase their revenue, and have more growth opportunities. Solely relying on traditional credit scoring data is ultimately leaving money on the table and a large population in need unassisted.

Miss out on SPARK? Check out the full recap of the conference here.

Related Resources:

• SPARK 2017 Highlights
• From R&D to ROI: SPARK Venture Capitalists Tell All
• Breaking Through to Gen Z with Better Data

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