Experian: alternative data sets are crucial to modern credit
As financial difficulties become a reality for millions, the credit industry could play a significant role in healing COVID-19-stricken economies.
FinTech Magazine (FM) held a Q&A with (AL), Vice President, Data Business, Consumer Information Services at Experian North America, to find out how the credit ecosystem has evolved, which technologies are being leveraged, and the importance of alternative data sets.
FM: Please describe your role at Experian.
AL: I joined Experian in 2012. In my role, I oversee product management related to Experian’s traditional credit and alternative data assets, which includes, but is not limited to, credit scoring models and tools.
FM: How has the credit ecosystem evolved in recent times?
AL: We’ve seen tremendous growth in the types and diversity of predictive data attributes being used to assess consumer creditworthiness in lending decisions. This evolution is good news for lenders and consumers alike.
At the same time, we’ve seen a shift in consumers’ willingness to contribute additional information if it increases their opportunities for credit access. One example is the success we’ve seen with , a free, first-of-its-kind tool launched in March 2019.
[Boost] allows consumers to contribute their on-time telecom and utility payments, including Netflix, directly to their credit report for an opportunity to improve their credit scores. This marks a move toward greater consumer control in the credit scoring process.
FM: Experian operates in an incredibly data-rich field. How are you leveraging that information?
AL: Artificial intelligence and machine learning have been game changers in extracting meaningful insights from data.
Our integrated fraud offering, , helps combat synthetic identity fraud by determining the authenticity of an identity used on a credit application. It does this by pinning the personally identifiable information included on an applicant’s credit report against Experian’s exclusive traditional and alternative data attributes.
In real-time, lenders will receive a ‘yes’ or ‘no’ indicator on the requested credit report noting whether the identity is a synthetic identity or not. This combination of data and technology has the potential to authenticate identities, increase application approvals and prevent significant lender losses.
Experian is so confident in our solution that we’ll share in loan losses on assured profiles with our clients if we get it wrong, which is a first for the industry.
FM: Why are alternative data sets crucial to modern credit?
AL: As an immigrant to the United States, I understand the challenges of living with a limited credit history. After arriving [from Canada], it didn’t take long for me to discover a principle that still rings true: an established credit history is the gatekeeper to financial opportunity in America.
I know that my story is a common one with more than 100 million people in America who lack access to fair and affordable credit, either due to limited or no credit histories or subprime credit scores.
Someone with a limited credit history may be making consistent, on-time payments for things such their cable, utilities, internet or mobile phone. These payment histories can demonstrate that an applicant can afford to repay a loan they’ve applied for, even in the absence of enough traditional financial information.
By using alternative data in conjunction with traditional credit data, lenders can mitigate risk and keep the credit economy flowing while helping consumers access the financial services they need.
FM: How are you ensuring that the collected data is used ethically?
AL: At Experian, we believe we have a special responsibility to consumers, especially when it comes to creating greater financial inclusion.
All of the data used to assess the creditworthiness of a consumer is regulated by the Fair Credit Reporting Act, meaning that it is displayable, disputable and correctable by consumers.
FM: What role could the credit industry play in healing the post-COVID-19 economy?
AL: Improving financial access for thin-file and credit invisible consumers will play an integral role in our road to economic recovery.
While it is difficult to predict when the economy will return to pre-COVID-19 levels, it has never been more important to protect consumers’ financial health and maintain the integrity and accessibility of the credit economy.
Combining traditional credit data with alternative data to access consumer creditworthiness plays a critical role in achieving this. Doing so will help determine a consumer’s stability, ability and willingness to repay during the current financial landscape and beyond.
Amber Group Valued at US$1bn in $100m Funding Round
Amber Group, a cryptocurrency financial services firm, has raised US$100m in a Series B funding round at a pre-money valuation of $1bn.
The funding round was led by Chinese investment firm China Renaissance, and other participants in the Series B include Tiger Brokers, Tiger Global Management, Arena Holdings, Tru Arrow Partners, Sky9 Capital, DCM Ventures and Gobi Partners. Existing investors Pantera Capital, Coinbase Ventures and Blockchain.com also joined in.
Michael Wu, co-founder and CEO of Amber Group said in a statement that the funding would be used to “expand global operations to meet client demand and develop market solutions for the world’s leading crypto investors and companies.”
“We’ve had record months over the past quarter across both client flow and on-exchange market-making volumes,” Wu said in a press release. “Our cumulative trading volumes have doubled from $250 billion since the beginning of the year to over $500 billion.”
Cryptocurrencies are becoming increasingly popular, with many people investing, although not everyone seems to know what they are investing in. Using survey data collected from 750 investors earlier this year, Cardify found that only 16.9% of investors who have bought crypto “fully understand” the value and potential of cryptocurrency, while 33.5% of buyers have either zero knowledge about the space or would call their level of understanding “emerging.”
Who is Amber Group?
Amber Group is a global crypto finance service provider with a presence in Hong Kong, Taipei, Seoul, and Vancouver. Founded in 2017, Amber Group services over 500 institutional clients and has cumulatively traded over $330 billion across 100+ electronic exchanges, with over $1 billion in assets under management. The company said that its assets under management, or AUM, reached $530 million in 2020, representing a 275% increase from the previous year.
Instead of being a cryptocurrency exchange that allows users to trade individual digital coins, Amber Group CEO Michael Wu said the company is bringing a “private banking experience to the everyday customer.”
Their goal is to optimise investment flexibility, maximise investment returns and deliver long-lasting value for their clients. In 2019, Amber Group raised $28 million in Series A funding led by global crypto heavyweights Paradigm and Pantera Capital, with participation from Polychain Capital, Dragonfly Capital, Blockchain.com, Fenbushi Capital, and Coinbase Ventures.