Outdated credit scoring systems fall short in terms of accurately capturing this overall financial picture, especially in the whirlwind that is digital lending. As we have moved to a digital economy and an era of growing e-commerce, there is a massive amount of data available that would give us real-time trading information on how good borrowers are in paying back their debts. And then comes the risk, but not with RiskSeal — a credit scoring platform utilizing data-driven digital footprint analysis to approve more customers at lower risk.
In this article, we will ask the question what is data driven digital footprint analysis and specifically, how can platforms like RiskSeal, completely revolutionize the lending industry with the accuracy that it provides in credit scoring.
Understanding digital footprint analysis
Digital footprint analysis is fundamentally studying what people do online and its ties to potential financial activity. Compared to credit score based methods which look at the past financial behavior and old credit bureau reports, digital footprint analysis will consider what an individual is doing now.
This will help lenders to build a significantly more comprehensive and detailed image of the borrower, by examining real time data from multiple online sources to better understand the financial attitude of a new customer, before approving them for a loan.
For example, the specific types of data points a company could look at as part of scoring your digital footprint include:
- Digital commerce overview: Online shopping frequency, e-commerce payment behavior, and online buying budget trends.
- Social media execution: posts, relationships and behaviors.
- Mobile: App downloads, Subscription Payments, Financialapp usage
- Internet browsing and location data: revealing about someone online financial behavior, patterns, and also stability.
RiskSeal used these unique data points to craft an alternative credit score that provides lenders a more holistic view of the applicantlicate’s creditworthiness.
Why traditional credit scoring falls short
It is based on historical financial information like loan payment records, current debt and income statements. Although these criteria make sense, they are not necessarily indicative of the current financial position of a borrower or his ability to properly pay down new loans going forward.
This approach is commonly inefficient, as it alienates a large portion of the population, particularly those with thin credit histories or those who transact digitally more so than traditionally through financial institutions.
However, traditional credit scoring is subject to some key limitations.
- Leaving behind the “credit invisible”: A significant portion of the world has little or no formal credit history, especially in emerging markets.
- Limited to monthly updates: Traditional credit scores do not change on a daily basis and thus they cannot incorporate current data regarding one’s financial behavior.
- Cannot recognize digital users: In the developing world, most of the people are migrated towards digitized transactions and you will not be able to take users based on their behavioral factors which means by using everything manually things are unrealistic.
In contrast, digital footprint analysis like the one used by RiskSeal allows lenders to evaluate people who might not have long or any credit files and yet are savvy with their money given their online behaviors.
The power of data-driven insights with RiskSeal
The RiskSeal platform aims to help lenders using old credit scores. RiskSeal uses advanced algorithms and data mining. It generates credit scores based on borrowers’ digital footprints alone. This gives businesses a better risk assessment tool.
How RiskSeal Can Improve Approval Rates of Lenders With More Precise Underwriting?
- Holistic risk assessment
RiskSeal leverages behavioral data to provide a comprehensive risk assessment, offering insights into creditworthiness and potential financial risk. By analyzing patterns in digital behavior, RiskSeal can enhance decision-making for lenders and financial institutions.
- Using real-time data for faster and more accurate decisions
However,lending decisions in many cases are based on credit reports that neither depict the present fiscal state of a borrower. Real-time data analysis ensures RiskSeal provides the latest behavioral trends and confirms that decisions are based on current financial habits. That is really helpful for pinpointing people that have changed into more realistic with their money.
- Greater approvals with less risk
According to the company, lenders using RiskSeal have observed an approval rate that is much higher than those of traditional methods because its system can target creditworthy borrowers (up to 40% of borrower applications) whom existing ways would reject.
Simultaneously, granular analysis of online behavior will assist with risk reduction by pointing out potential red flags like unusual spending habits or risky online approvals. For financial institutions, this combination of higher approvals with mitigated risk represents a game-changing tradeoff.
- Faster loan approval process
RiskSeal accelerates the loan approval process by automating due diligence and providing real-time data processing for lenders. With RiskSeal, lenders can get rapid credit assessmentsUnlike standard credit scoring methods that tend to involve delays and some manual verification or intervention. Faster loan approvals to the borrower help improve customer satisfaction and lend a competitive edge to lenders in an intensely crowded market.
The impact of digital footprint on financial inclusion
Highlighting some of the key benefits of digital footprint analysis, I ascertained that besides bringing transparency, it can also help in advancing financial inclusion. Billions of people globally, particularly in emerging markets do not have access to traditional credit, yet they are digitally enabled and participate in the digital economy. RiskSeal allows users to assess this consumer segment based on their digital financial behavior for the first time and makes credit available to them.
With the use of alternate data to predict creditworthiness, lenders can leverage new sets of customers, especially the underbanked aiding them in not only becoming a part of the banking process but also support inclusive growth.
Why choose RiskSeal?
While there are many platforms which provide digital footprint analysis, RiskSeal differentiates itself by the high level integration of advanced analytics, machine learning and user experience design.
Top reasons why lenders prefer RiskSeal
- Data privacy & security: RiskSeal ensures its data collection meets privacy laws.
- Custom features: Lenders leverage more than 300 explainable data points to develop bespoke features tailored to your market’s unique needs and population traits, optimizing model performance and maximizing uplift.
- Results: RiskSeal enabled lenders to double their approval rates while maintaining or even reducing risk levels.
Conclusion
Yet, the digital age needs more than a credit score to extend loan eligibility in a credit market. Platforms like RiskSeal are using digital footprint analysis to verify online history. This is making lending more reliable, based on actual data. Lenders can advance RiskSeal. It helps them boost approval rates and expand credit access. They can also make better loan decisions using real-time online behavior.
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