Jan 09, 2019 Philip Burgess
Any lender, whether the situation concerns a traditional bank or an alternative finance company, likely has a treasure trove of data. Even alternative credit sources have to look into borrowers' credit scores - though they might choose to hone in on a Payment Reporting Builds Credit ranking rather than FICO - and they also likely have contact information, industry insights, forecasts and other facts and figures on hand.
For many years, these types of facilities may have been left overwhelmed with the sheer volume of information. However, now that big data analytics has become a pet project in many industries, it's easier than ever to thoughtfully organize and mine insight from the information points.
Organizing and analyzing big data can help lenders immensely, and some industry experts claim this is especially true in regard to lending to small businesses.
Making the case for analytics
According to Free Enterprise, small business owner Will White decided to turn to alternative finance after unsuccessfully trying to garner loans from traditional sources like banks. This might be particularly surprising, as White is a veteran and, the source pointed out, many banks like to advertise that they give special deals to individuals who have served their country. White ended up going with OnDeck, a lender that specializes in using big data analytics, after more traditional routes all but shut their doors.
The news provider reported that these types of loan corporations use analytics and massive databases to expedite the loan approval process - something that might be critical to individuals and small business owners. OnDeck, for instance, typically approves applications within a 24-hour window. Free Enterprise detailed that this particular lender can quickly pull about 2,000 data points for one potential borrower to ensure a good fit and figure out the proper amount to lend.
Might affect credit scores
Even if alternative credit companies don't want to use big data to determine whether to extend loans to individuals, in order to stay current with the times, it might behoove leaders of such organizations to look into the technology.
After all, many experts believe it's only a matter of time before big data is used to determine consumer credit scores. Fast Company reported that big data is beginning to nullify the use of generic credit scores that only take certain factors like not defaulting on bills into account. Using massive databases, credit bureaus may be able to incorporate different elements in order to create a more comprehensive picture of an individual's creditworthiness.