How to Leverage Telco Data Scoring for Predicting Credit Scores

Telco Data Scoring and Fraud Detection Solutions

How to Leverage Telco Data Scoring for Predicting Credit Scores

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 credit-scoring process 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. 

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In emerging economies like the Philippines, 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 regular fixed wages. 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 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?

Telecommunication providers capture various data points on mobile phone usage. Telcos trace information related to call duration, call origin location, call destinations, porting history, monthly bill payments, handsets used, number of missed calls, and other types of data. When all of these factors are analyzed, they’re clumped into a single category called telco data.

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 credit scoring using telco data 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. 

What is telco data credit scoring?

Businesses no longer have to rely on the traditional banking system in determining a consumer’s ability and willingness to pay for products and services.

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.

Mobile phone usage is a great indicator of the user’s economic activity and lifestyle. 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. 

Why is telco data powerful in determining credit worthiness?
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Other useful info telco data scoring systems includes fraud detection and flagging possible identity theft by triangulating a loan applicant’s geo-location movements based on his mobile usage, and comparing them to the address he provided in his loan application.

These insights are accurate in predicting human behavior beyond transaction data. Transaction data only tracks consumers when they purchase or make transactions, whereas telco data reveals customer behavior patterns. For instance, the frequency of phone “load” top-ups can provide indicators of income level, while location data provides insight into job stability, the length of time they’ve owned the phone, 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 mobile phone users in a matter of seconds.

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What is the revenue potential of telco data?

Data is a top strategic asset for telcos and financial institutions today. They provide a treasure trove of customer information at their fingertips and the immense opportunity to capitalize on this valuable information.

What can companies do with the information? It can serve to enhance customer experience, improve the effectiveness of their marketing strategies, and develop new sources of revenue. 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, and customer service.

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Benefits of choosing FinScore’s telco data scoring system

At FinScore, our Telco credit scoring system is built on 400 various MNO data variables that include top-up patterns, location and device data, data and voice usage. 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 Philippines market, especially with our long-standing partnership with SMART. As of June 2019, we have onboarded one of the market’s biggest consumer lenders and delivered nearly half a million credit scores to partner institutions.

For more information and enquiries about our telco data scoring system, contact us today. 

FinScore is a financial technology company in the Philippines that offers a powerful credit scoring platform and fraud detection tool based on alternative data, including telco-based data. 

As the pioneer in lending and scoring of the unbanked, we continuously empower banks, financial institutions, and credit bureaus with flexible platforms to help them make insightful and reliable credit decisions.

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