A recent commercial research report forecasting the future of credit scoring has underlined the importance of AI, Open Banking, and the use of alternative scoring models to boost financial inclusion and also open up new customer segments.
Using input from sources such as social media activity and monthly utility bills is touted to enables financial institutions to expand into unbanked and underbanked populations throughout emerging markets (the African & Middle Eastern region) that are expected to achieve 117% growth over the forecast period of 2023 to 2028.
The paid research report urges the use of Open Banking within alternative credit scoring in order that credit bureaus and other financial providers to access bank account transaction information. This is supposed to “help enrich credit data, create a holistic view of the consumer; determine a more accurate credit score.” The commercial report also urges the use of Open Banking within business credit scoring, as this technology is touted to improve critical lending and access to finance for small- and medium-sized enterprises.
Combined with AI and open banking, alternative credit data and embedded scoring models “enable providers to help alleviate issues with thin files, where limited information is held on individuals and businesses, in both developing and developed markets; enabling more accurate and predictive credit scoring.”
According to research author Cara Malone, Juniper Research, the firm selling the report: ““Open Banking can address numerous challenges, especially relating to cash flow and debt management. At present, the use of Open Banking in business credit scoring is lagging. It creates greater ease and transparency of sharing financial data; elevating business credit scoring, unlocking greater access to lending.” If the above technology elements prompted by the research are implemented according to predictions, the firm expects credit scoring services to grow by 67% to US$44bn by 2028.
