Most Filipinos are unbanked or underbanked
Despite the presence of banking institutions in the Philippines for over a century, 70% of the adult population in the country remains unbanked or underbanked. Unbanked refers to adults who do not use banks or financial institutions in any capacity. The underbanked refers to adults who have bank accounts but don’t actively use them, either because their account feels ‘off limits’ due to debts owed or because they feel more comfortable within the cash economy. In turn, they lose out on opportunities from the current lending system.
Fortunately, fintech companies are introducing alternative credit scoring systems to banks, lenders, and other financial institutions in the Philippines. By using alternative data sources, such as telco data, to assess the creditworthiness of a consumer, fintech firms are playing an important role in improving financial inclusion in the country and helping the unbanked gain access to better financial aid services.
Here are several ways in which fintech companies, through the use of alternative credit scoring, are improving the credit scores of Filipinos:
Providing Credit to the unbanked and underbanked
The unbanked and underbanked have little to no opportunity in securing loans due to their non-existent or poor credit history. This is why many low-income Filipino families and millennials struggle to get a foot on the lending ladder, even if they have the financial capacity to pay.
Fintech companies help banks and lenders ease this issue by using alternative sources of data (e.g. telco data) to analyze a candidate’s creditworthiness, helping kick-start a financial system that’s inclusive for those with no credit history.
Improving affordability for people with existing credit
For consumers who already have a loan or are able to get one, it’s possible that they’re not getting the best deal available. This is particularly applicable to borrowers who are new to credit products, since traditional credit rating agencies typically give lower scores to individuals without an established credit history.
Fintech companies help amend this issue by using innovative technologies that better assess the risk levels in lending. For instance, fintech companies assess a borrower’s creditworthiness based on alternative data sources (such as telco data) that show transaction patterns and behavior. They enable banks and other lenders to deliver financial services in a sustainable and responsible way, which is at the heart of financial inclusion. Businesses also no longer have to rely on the traditional banking system in determining a borrower’s ability and willingness to pay for products and services.
Updating credit scores in real-time
While some people can maintain a long and healthy credit history, it’s not the same for everyone. Once a person has a bad record, it can negatively affect their credit rating for a long time, sometimes up to 5 years. For example, if someone missed repaying a loan 2 years ago, the credit agencies will view this as highly unfavorable, even though the person’s financial status has stabilized.
Fintech companies help solve problems in this regard by providing real-time updates and a thorough assessment of a person’s financial status. The data they gather is much more reflective of an individual’s current ability to pay back a loan.
The rise of credit scoring platforms
Today, more and more consumers are benefitting from the technologies provided by credit scoring companies in the Philippines like FinScore, who use telco data to determine an individual’s creditworthiness. As many Filipinos remain unbanked or underbanked, the alternative credit scoring platforms from fintech companies will be the ultimate tools in achieving unbiased financial inclusion in the Philippines.
FinScore is a leading fintech company and credit score provider in the Philippines. We’ve made it our mission to provide innovative scoring solutions to the dynamic needs of banks, financial institutions, and credit bureaus.
Our mobile data credit scoring in the Philippines allows institutions to offer better services to existing customers, attract new ones, and approach untapped market segments. Through our Telco Scoring model, we provide insights based on 400+ variables, including call patterns, transactions, social circle, location, loyalty, and profile.