Following everyone’s shift to digital in 2020, data now plays a greater role in the financial industry. Open Lending has been using data to help banks and credit unions increase interest income and grow their auto loan portfolios, but now that consumers are expecting more from financial institutions' digital services and offerings, it’s more important than ever to look toward alternative data alongside traditional sources to move forward and best serve borrowers.
Looking to the Future
Lenders often analyze the past to make future decisions, but today that strategy alone isn’t going to cut it. The volatility the pandemic wrought on consumers’ financial standings means what worked in the past may not work the next day, next week, or next month. Financial institutions must be able to look ahead for a broader view of borrowers and potential borrowers to manage risk. Alternative data and insights can provide crucial information needed to make wise strategic decisions. The financial services sector is not alone. According to a report from Data Science Central, other industries such as transportation and retail are beginning to turn toward alternative data to improve overall business.
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Look for New Opportunities
Not only are lenders looking at alternative data and the insights it provides, but more American consumers also want lenders to look at this data as a part of the credit evaluation process. According to TransUnion, in the case of credit unions, record low delinquency and charge-off ratios, along with a desire to reverse slowing loan growth have led to them consider trended credit or alternative data to identify opportunities in their local communities. Additionally, the Experian 2020 State of Alternative Data reported that 96% of lenders agreed alternative credit data allows them to more closely evaluate creditworthiness in times of economic stress. The report found that 3 out of 4 consumers believe they are a better borrower than their credit report represents.
Filling the gaps with alternative credit data during uncertain times can help your bank or credit union grow while also mitigating risk.