Information and insights company TransUnion Africa has established a strategic partnership with Chenosis, Africa’s API marketplace, that makes it possible for both alternative and traditional credit data to be included in the credit profiles of South African, Rwandan, and Zambian consumers.
The solution, available to TransUnion’s CreditVision customers, uses alternative data to give lenders deeper insights and a more complete customer picture, improving the risk predictability of consumers and small businesses who have little or no credit risk profiles by up to 25%.
Credit scores are values derived from formal credit data that uses statistical methods to help predict a person’s ability to pay back a loan. A credit score can help influence the initial decision to lend, the size and term of the loan a consumer or small business can afford, and can even play a role in determining the interest rate charged by the lender.
Consumers that have no or low credit scores often face obstacles in accessing lifestyle improvements made possible by credit, including unsecured products like clothing accounts or personal loans, or secured products like vehicle finance or home loans. Emerging small enterprises with no credit score may also struggle to access the capital injections they need to grow their business and employ more people.
Although 70% of South Africa’s population has access to a transactional bank account, usage is low, with 27% of people withdrawing all their money as soon as it is paid to them. These, and other factors, all contribute to low levels of financial inclusion and use of credit. No or low credit scores, or ‘thin file’ records, where a consumer or business has little or no credit history, are a barrier the telecommunications (telecoms) alternative data initiative between TransUnion and Chenosis is designed to overcome.
“One of the major impediments to further financial inclusion and greater credit opportunities is the absence of reliable credit and other information on individuals and enterprises that have not traditionally used banking and insurance services,” said Lee Naik, CEO of TransUnion Africa.
“For example, telecoms data can be used to improve access to credit services by bridging the information gap between traditional credit information and the data generated by consumers and entrepreneurs when they use their mobile phone, or they buy data either pre-paid or on a post-paid contract. This and other information gives us a record of their ability to make regular or semi-regular payments and can help demonstrate the ability to afford monthly credit repayments,” he added.
When a lender requests a consumer’s telecom data, the request is processed via the Chenosis API, which sends a detailed SMS to that consumer, requesting permission to share the relevant data with the inquiring party. Once the consumer has agreed to the request, Chenosis retrieves the consumer’s data, and shares it, within the requirements of protecting personal information.
Telecoms data is already used by mobile operators to assess a user’s risk when considering upgrading a customer from a prepaid account to a post-paid account – with the collaboration between the three industry leaders now making it possible to include this information in a credit score.
Telecoms data can provide insights into a consumer’s current and likely behaviour in various ways. For example, a person’s calling behaviour may provide insights into their comparative ability and willingness to repay debt. Initiating larger numbers of calls rather than receiving them, and making of calls of long duration, are used in some data models as supporting a higher credit score.
Customer and billing records offer direct financial data. For pre-paid subscriber accounts, the size and frequency of top-ups and the choice of plan selections illustrate the user’s financial profile, with some similarities to top-ups of mobile money accounts.
A user who carefully manages his or her prepaid account balance over time to permit smoother usage may be a more responsible borrower. Similarly, where a customer’s service usage patterns follow a monthly cycle, he or she may be more likely to be earning a salary.
“Chenosis is excited to support TransUnion’s drive to provide more access to Financial Services for traditionally underserved sectors in South Africa, Rwanda and Zambia. This use case exemplifies the power of APIs to facilitate consented data between parties in a secure, authorised, authenticated manner with a clear governance framework to maintain data privacy,” said Saad Syed, CEO of Chenosis. “We believe this is just the beginning of our partnership with TransUnion and hope to jointly build an API ecosystem which will solve problems and create opportunities for consumers and businesses by providing a platform to securely exchange data and services.”
“This strategic partnership with Chenosis, using CreditVision Link, is one way that TransUnion is furthering financial inclusion in sub-Saharan Africa,” Naik added. “We are continuously seeking ways to expand our database to include alternative scoring partners to our bureau data, to more accurately represent more consumers and small enterprises, supporting them in gaining access to the financial services they need to achieve their goals and access new opportunities.”
