Stevie-winner Braviant Holdings is a financial technology company that uses machine-learning to assess borrowers' credit and help them achieve lower rates.
Over 24 million American households are underbanked, and another eight million are unbanked (FDIC National Survey of Unbanked and Underbanked Households, 2017). While the former have restricted access to financial services (primarily due to bad credit scores), the latter have little or no access at all. As one can imagine, this closes a lot of doors. Many of life’s necessities, such as getting a job or renting an apartment, call for a bank account and a good credit history.
What makes this scenario even more unfortunate is that the unbanked and underbanked often land in these unfavorable financial conditions due to circumstances beyond their control. After all, not everyone with a low credit score is a habitual defaulter. For instance, many have low credit scores because of the 2008 financial crisis. Similarly, all those without bank accounts are not willfully refusing to get one. Many get their applications rejected because they have thin credit files or are migrants who don’t possess all the necessary documents.
Luckily, the fintech industry is now putting big data, machine learning (ML), and augmented analytics to work for these two neglected financial demographics, and the results are promising.
Banking the Unbanked
Online banking and lending services have made it convenient to access and maintain bank accounts, even for those in remote and rural areas. However, despite these advances, around 1.7 billion adults remain unbanked worldwide. Several fintech solutions are working toward making it easier for these individuals to create and to benefit from bank accounts of their own, though. The most notable among these is Onfido, an identity verification company based in London, United Kingdom.
Onfido does not follow the typical identity verification process. They pair highly advanced ML-based document checks with facial verification to compare user-furnished identity documents with their selfies. This makes it easier for individuals to prove their identities and open new bank accounts. This is particularly important for those with thin credit files whom banks are reluctant to trust and migrants who do not possess all the documents required for in-person verification..
Beyond Credit History and Scores
Fintech products are revolutionizing the way credit is assessed, and they are now paving the way for fairer access to financial services.
Zest AI, an artificial intelligence (AI) software platform for credit, based in Los Angeles, California, United States, helps lenders make faster and more accurate decisions on borrowers who are traditionally considered risky. It does so by using and analyzing thousands of data points to better assess predicted risk. Their clients have achieved, on average, a 15 percent increase in approval rates and reduced losses by almost 30 percent.
UltraFICO, a credit scoring system based on augmented analytics, was launched by FICO, a data analytics company based in San Jose, California, United States. It serves as yet another good example. While still in the works, it promises to be a huge step up from the antiquated FICO score system that prevents millions of people from receiving credit because of incomplete credit histories. UltraFICO will create more complete credit histories by using data from FICO, Experian, Finicity, different finance houses, and banks.
Stevie-winner Braviant Holdings, a fintech company based in Chicago, Illinois, United States, also offers financial solutions that help non-prime consumers graduate to lower rates as they work toward prime credit. They do so by building machine-learning decision models that look beyond a traditional credit score to more accurately assess the prospective borrower’s true ability and willingness to repay.
“Mainstream financial institutions cater to the needs of U.S. consumers with proven credit history, but more than 50 million adults labeled ‘underbanked’ are forced to look outside the traditional banking system to meet their needs,” says Stephanie Klein, CEO of Braviant Holdings. “Braviant offers tech-enabled credit products to help these deserving consumers access the credit they need today and work toward better rates in the future.”
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