News & Resources

How data aggregation helps establish creditworthiness

Sep 26, 2017 Walt Wojciechowski

How data aggregation helps establish creditworthiness

Business owners, regardless of their companies' sizes, have two overriding goals: customer satisfaction and making smart lending decisions. There are a variety of means by which both can be achieved, one of which is data aggregation.

As its title suggests, data aggregation is the process by which businesses - frequently lenders and banks but many others as well - accumulate information about a potential borrower to establish the person's creditworthiness. Aggregation and financial technology companies - or "fintechs" -  do this by compiling an eclectic mix of payment options that go above and beyond traditional credit, as some people may not have access to credit or prefer to buy with cash or some other transaction system, like mobile pay.

Jon Stein, CEO of an online investment firm, noted that the advantages of data aggregation have been evident in a variety of industries, both for businesses and consumers.

"Just think about all the important advances in health care that depend upon your data, your DNA, your health care records," Stein told American Banker. "If all that was owned by a single doctor and you didn't have the right to access that data, own that data, transfer it to another doctor if you wanted to, there would be a terrific outcry."

Financial technology companies help business make smarter lending decisions.

Enhances transparency
Alternative credit reporting is one of the payment systems data aggregation relies on to help businesses make informed lending decisions. After all, consumers today make many purchases and payments that aren't traditionally counted in credit analysis. These include monthly rent bills, utilities, mobile phone bills as well as internet and cable television packages. Those who consistently make their payments on time should be rewarded for their efficiency and expediency, and alternative credit helps make this possible.

But data aggregation and alternative credit are also important because many Americans don't have a traditional credit score. Indeed, according to the Consumer Financial Protection Bureau, 45 million Americans have no credit whatsoever. Alternative credit analysis adds context to buyers' financial situation so companies can get a clearer picture of their customers' reliability.

At Microbilt, we believe growing your customer base is best accomplished by lending smarter. We have the tools that can fuel your risk management solutions. Here's more on why you should consider joining the alternative credit reporting revolution.