New Ways to Score Risk Can Improve Financial Inclusion
Blog: Enterprise Decision Management Blog
The path to a better lifestyle includes access to credit. Unfortunately, an estimated 3 billion people worldwide fall outside the credit mainstream – they either don’t have a bank account or they have so little data at the credit bureau that lenders may skip over them, or classify them as very high risk.
That’s why FICO has announced the FICO Financial Inclusion Initiative, a global effort to increase access to affordable credit for consumers and businesses with limited or no credit history. We’re using a combination of business partnerships, innovative new products, mobile platforms and cloud-based services to help credit grantors make affordable credit more accessible to unbanked and underbanked adults worldwide.
The first international efforts of the initiative are:
- A partnership with EFL Global to expand credit scoring options for lenders and consumers in Turkey, Russia and Mexico using consumer-contributed psychometric scoring technology.
- A partnership with Lenddo to develop scores that bring more consumers in India into the credit mainstream.
- FICO® Score XD – a new score launched in 2015 in the US that leverages alternative data sources to give issuers a second opportunity to assess otherwise unscorable consumers.
The initiative has already drawn praise. “Access to financial services at affordable rates is a key component of financial inclusion for individuals and small businesses,” said Tony Lythgoe, co-practice manager for Financial Inclusion and Access, Finance and Markets Global Practice, World Bank Group. “The development of innovative analytical solutions targeted at excluded and underserved individuals and businesses is a welcome addition to the efforts to end extreme poverty.”
“Commitment on this scale by FICO to develop innovative solutions leveraging alternative data to help increase financial inclusion is very promising,” said Michael Turner, founder, president and CEO of PERC. “With emerging technology and leading organizations focused on this effort, it really is possible to make a scalable positive impact for millions of people.”
Over the past 60 years, FICO has brought credit scoring to countries around the world, helping make lending there non-biased and more accurate. Over the last 27 years, the FICO Score has brought additional gains to the United States economy. My colleague Jim Wehmann, who heads our Scores group, notes that “This initiative is an exciting next chapter in the FICO story of innovation that can enable lenders’ financial inclusion initiatives and give more people access to credit, which can have broader benefits for the economy.”
For more information: http://www.fico.com/financialinclusion
The post New Ways to Score Risk Can Improve Financial Inclusion appeared first on FICO.
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