LOCAL banks are called to look into the use of alternative or non-traditional consumer data in its efforts to design, improve and deliver financial services to promote financial inclusion in the country.
In an earlier speaking engagement, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said these “alternative data” can help financial service providers to expand their services especially to the unbanked and underbanked population in the country.
Unlike traditional data—composed of bank transactional data and credit bureau information—alternative data comes in several forms, including social media, mobile data, utilities data, behavioral data, online transactions, geolocation data and browser data, among others.
“With alternative data, a more complete picture of the client is painted thus allowing for more individuals and businesses to be assessed,” said.
The BSP further said forecasting creditworthiness is a promising use case of alternative data, especially since many Filipino adults and micro, small and medium enterprises (MSMEs) still have little or no credit history.
Diokno also noted that in a September 2021 rapid survey by the BSP, respondents cited better customer profiling, improved pricing of loan products and lower default rates as the realized benefits of using alternative data.
While it took an average of two years before the benefits were realized, the potential is significant, according to the BSP chief.
“The use of alternative data for credit scoring is just one example of how data can be used to benefit consumers. Looking ahead, we must continue to take initiative in fostering an inclusive digital financial ecosystem,” the governor added.
In 2021, the country’s public credit registry and repository of credit information called for alternative and non-traditional data to help financial consumers gain access to credit facilities.
Credit Information Corp. (CIC) President and CEO Ben Joshua A. Baltazar earlier said traditional credit data is mainly reliant on credit repayment activity and may exclude the so-called credit-invisible, underserved and newcomers in the financial system.
“Alternative and non-traditional data—which includes data from non-conventional sources such as online transactions, telecommunications and utilities—are complementary to the traditional data that the CIC currently receives from its covered financial entities,” Baltazar said.