How to Leverage Telco Based Data for Credit Scoring
Unlock the Power of Telecom Data for Credit Scoring
In formal banking systems, credit is extended to customers based on their credit scores. Financial institutions such as banks and credit card companies assess an individual’s creditworthiness using information from in-house databases and credit bureaus, which is converted into a single metric: the credit score.
The traditional process of credit scoring includes verifying the customers’ identities as well as their willingness and ability to pay. Their willingness to pay is based on their past credit performance, while their ability to pay is supported by their current income and amount of outstanding debt.
In emerging economies like the Philippines where telco credit scoring still isn’t the norm, the traditional process of determining an individual’s creditworthiness is limited. The unbanked sector (people who are not served by banks or other financial institutions) often struggle with receiving access to credit because many of them do not have a bank account due to a lack documentary requirements and physical access. These people are often freelance workers or self-employed individuals engaged in various, non-regular, income-earning activities.
According to a CNN report, 77% of Filipinos remain unbanked. However, this doesn’t mean they don’t have the ability and the willingness to pay. That’s why fintech (financial technology) companies in the Philippines are now developing innovative approaches such as telco based credit scoring to determining a consumer’s creditworthiness and improve financial inclusion.
One of the most effective approaches is telco data credit scoring.
What is telco data credit scoring?
Telco credit scoring begins with telecommunication providers who capture various data points on telco usage. Telcos trace information related to call duration, geo-location, top-up amounts duration of SIM ownership, frequently contacted numbers, amount of load shared to peers, and other types of data. When all of these factors are analyzed, they’re clumped into a single category called telco data. Telco or telecom data can then be used for alternative credit scoring.
Telco data scoring systems are creating new avenues of credit for unbanked customers in the market. To reach the underbanked and unbanked, fintech companies are now converting this kind of individual telco user data into “predictive scorecards”. This new form of predictive telco based credit scoring analyzes usage history together with other data on the consumer, such as bill paying history, the number and type of accounts they have, and whether they pay their bills on time.
Telco Data is notably the alternative data that is considered to have the most predictive power
for measuring creditworthiness in the absence of credit history that is common to unbanked Filipinos.
Why is telco data powerful in determining credit worthiness?
One of the most promising sources of consumer data today is the mobile phone market. As of 2020, there are now over 75.6 million mobile phone users in the Philippines. Mobile phones are accessible to a wide segment of the population and full of valuable information that companies can mine to determine someone’s credit score.
Telco usage is a great indicator of the user’s economic activity and lifestyle, making telco credit scoring an up-to-date and accurate representation of a user’s ability to pay. For instance, a user with a prepaid phone who makes regular phone calls of a certain length may be indication that they have enough money to recharge the plan, and that their income is sufficient to maintain their regular phone habits. Generally, postpaid subscribers are also trusted more than prepaid subscribers because they’re committed to monthly payments.
Other uses provided by telco data scoring systems included fraud detection and verifying a loan applicant’s declared information. By using a fraud detection tool based on geo-location data, you can compare a person’s home and work address with the actual geo-location data as provided by his mobile phone’s telco data. If it matches, it can indicate that the loan applicant is honest with his information.
These telco based credit scoring insights are accurate in predicting human behavior beyond transaction data. Transaction data only tracks consumers when they purchase or make transactions, whereas telecom data for credit scoring presents customer behavior patterns. For instance, the frequency of mobile “load” top-ups can provide indicators of income level and spending patterns, while location data provides insight into job stability, the length of time they’ve owned the SIM card, and how often they change jobs.
While the long-term power of using telco data in credit scoring systems has not yet been assessed, it promises to be an excellent alternative or complement to the traditional process. A consumer’s digital footprint is often difficult to manipulate and may offer a more comprehensive view of a consumer’s socioeconomic activity.
Telco data scoring systems also simplify the risk-profiling and credit scoring process, generating information on SIM card users in less than a second.
Telco data scoring systems also simplify the risk-profiling and credit-scoring process, generating information on mobile phone users in a matter of seconds.
What is the revenue potential of telco data?
Telecom data, if analyzed by machine learning and AI for credit for credit scoring, can be a top strategic asset for telcos and financial institutions today. Telecom data provides rich customer insights in real-time, allowing banks and financial institutions. This also allows the data to be reviewed instantly, making it an incredibly useful tool for financial institutions.
What can companies do with the information? It can serve to create revenue-generating products and services, enhance customer experience, and improve the effectiveness of their marketing strategies. With information on customer preferences, behaviors, and movements, companies can increase profits and revenues across the entire telco value chain – from product development and network operations, to sales, marketing, telco credit scoring, and customer service.
Benefits of choosing FinScore’s telco data scoring system
At FinScore, our Telco based credit scoring system is built on 400 various MNO data variables that include top-up patterns, location data, SIM age, data, voice usage, and many more. With cutting edge AI and machine learning technology, our application has an incredibly high predictive power. It can be used in combination with existing score models or as a standalone model.
Since late 2018, FinScore has been gradually gaining a strong presence in the Philippine market, especially with our long-standing partnership with SMART. We have onboarded one of the market’s biggest consumer lenders, the first BSP-licensed digital bank in the Philippines, and more rising stars in the financial industry. We have delivered over 5 million credit scores to our clients and facilitated over USD 640 worth of loans.
Harness the Power to Telco Credit Score Every Subscriber in the Philippines
TELCO DATA MARKET COVERAGE
Gain a competitive edge, achieve high market share, and offer attractive financial services with FinScore Telco Data Credit Scoring solution.
Our advantage is your advantage. FinScore is the only alternative credit scoring company in the Philippines that can telco credit score each and every mobile subscriber in the country. Confidently extend credit and manage risk to the unbanked and underbanked segments whenever and wherever they are in the Philippines – all based on Telco Data.
Developed for commercial banks, neo banks, BNPL platforms, digital lenders, multi-purpose lenders, and more, our flagship product can provide telco scores and fraud detection flags.