Here’s the thing: traditional credit scoring only looks at the hard numbers of someone’s finances. Income, loans, balance sheets – done. No room for nuance. What’s more, people’s lives are not always static and predictable. Circumstances can change dramatically in a few days, yet traditional credit checks usually rely on financial records from months, if not years back.
This is where access to customers’ real-time financial data comes in handy. Risk assessments become a lot more reliable when you can factor in the current financial picture. And then go one step beyond the hard numbers to better understand the spending behaviours behind them.
Understanding spending behaviours
Having data is one thing, but understanding it is another. To truly extract the value from someone’s financial data you’ll need to analyse individual transactions to find patterns.
The secret to this is using Tink’s data enrichment. This quickly cleans up transaction data and adds value to it – sorting transactions into categories so you can recognise spending patterns, and identify income, investments or other loans.
Simply put, it tells the story behind the numbers.
It helps you (or at least your credit scoring algorithms) better understand how someone spends their money. How much they may have left to spend after life’s essentials are taken care of every month. Or how likely they are to be able to – comfortably – make good on their debts.
And this, in turn, lets you to make better-informed credit and risk assessments – with results that are both better for your customers and better for your business.
Better results for businesses and their customers
Having a more holistic picture of a customer’s financial situation can make all the difference when it comes to making a well-grounded offer. By taking people’s lifestyle into account – and not just their revenue or account balances – you can offer them a loan, line of credit, or other financial service that truly suits their situation. All while reducing risk for your business.
For consumers, this means a better experience throughout. A simple, automated credit assessment process that doesn’t require any paperwork, and that has near-instant results. And the benefits extend well beyond the scoring experience itself, because it means they’ll be less likely to get credit lines or loans they’ll struggle to pay back.
On the business side, benefits include higher conversion rates (due to the improved user experience) and increased efficiency. But perhaps more significantly, it reduces the credit risk. Since the assessments are more accurate, businesses can be more competitive by providing better rates – there’s simply less risk of customers defaulting on their payments.
Another great bonus is that this gives more people access to financial services they may have been left out from before, because you’re not bound to the limitations that come with traditional credit checks. But we’ll dive more into the inclusivity benefits later.
You can learn more about our enhanced credit scoring solution on our website. Stay tuned for the next articles in this series, where we’ll get deeper into the tech behind our solution, and how it can make a positive impact for customers.