Lenders need to use alternative data as an overlay to traditional underwriting methods to help creditworthy customers in hardship because of the coronavirus crisis.
Congress should pass legislation authorizing use of nontraditional data sources to make credit more available to consumers who’ve taken a hit from the coronavirus pandemic.
Kaustav Das was part of Kabbage’s effort to transform small-business lending by using new data analytics, and the CEO of Petal wants him to help it do the same in consumer credit cards.
Regulators are beginning to recognize the importance of using alternative data to provide credit for the underbanked. Now is the time to expand its use across the industry.
Financial regulators’ statement cautiously encouraging banks to go beyond traditional underwriting in their lending decisions is a big step forward for the use of alternative data and artificial intelligence, bankers say.
Casting aside recession fears, the credit bureau predicts credit cards, mortgages, auto loans and unsecured personal loans should all perform well — including those extended by online lenders.
Alternative data "may improve the speed and accuracy of credit decisions and may help firms evaluate the creditworthiness of consumers," the agencies said.
The online platform lender Kabbage is making the move beyond just providing working capital loans to small businesses, putting it in direct competition with alternative acquirers and payment companies.
