The alarming absence of scorable credit data among 60 million US adults has brought together senior leaders to discuss ways of creating and delivering more equitable products through the powerful new initiative of TransUnion.
In response to findings that one in five adults in the US remains either outside the current credit ecosystem or lacks sufficient credit data to be scored by traditional risk models, TransUnion, the global information and insights company, invited senior leaders in the financial services and insurance industries to its inaugural Financial Inclusion Forum to discuss new ways to serve the underserved.
The Forum specifically addressed methods of meeting and engaging new consumers and the creation of equitable products and services, which will, in turn, open new sources of business growth while building long-term resiliency and prosperity.
Steve Chaouki, the company’s president of US markets and consumer interactive, describes financial inclusion as “core to TransUnion’s mission of ‘information for good’ because we believe all consumers should have the opportunity to participate in the credit ecosystem.”
In this way, Chaouki recognises the key correlation between economic growth and high market participation, adding that to produce meaningful change, “we convened leaders from two of the largest and most important groups to the financial futures of consumers and the economy.”
“Developing strategies that unite financial inclusion opportunities with responsible lending and policy underwriting will help marginalised consumers and allow these businesses to grow,” he continues.
Empower, engage and evaluate
The Forum included several executive roundtable conversations focusing on how to empower and engage more consumers who traditionally do not have access to credit or insurance as well as how to use more inclusive ways to evaluate their risk.
The discussion flowed between topics of building consumers’ confidence, fostering greater participation with tailored consumer experiences and generation greater fairness, inclusion and sustainable growth through innovation.
Roundtables even sought to share thoughts on what financial inclusion actually means for the insurance industry and how the application of nontraditional data could expand credit access and fully assess risk.
This agenda was accompanied by a fireside chat showcasing how TransUnion’s partnership with Pagaya applied predictive datasets and artificial intelligence to extend credit to more consumers.
Pagaya is a global technology company that has built an intelligent decision-making network that empowers financial institutions to deliver financial products and services to more people.
“We were honoured to join TransUnion’s Financial Inclusion Forum to share how the use of data can make a meaningful impact, ensuring more consumers get access to the financial products and services they need to meet their future goals,” said Leslie Gillin, the company’s chief growth officer.
“Pagaya works with partners like TransUnion to help some of the largest banks, fintechs and auto finance lenders enhance their underwriting decision platforms with our credit intelligence network to bring more consumers into the mainstream economy.”
The balancing act of financial inclusion
One of the key tenets of the Financial Inclusion Forum was that not all consumers follow a traditional credit path and that businesses need to leverage new data sources, particularly when considering first-time credit offerings to previously unscorable customers, who despite a lack of credit data, may ultimately prove worth the risk.
According to TransUnion’s Empowering Credit Inclusion study, in 2022, 5.85 million consumers opened their first credit product and became new-to-credit (NTC). While Gen Z made up the largest part of this group at 61 per cent, many consumers in older generations also opened credit for the first time.
This includes 21 per cent of Millennials, 11 per cent of Gen X, six per cent of Baby Boomers and one per cent of the Silent generation.
A key takeaway from the study includes the finding that NTC consumers are generally good risks when compared to other established borrowers with similar credit risk profiles.
“A delicate balance exists for organisations to support consumers while still managing risk within their portfolios,” comments Hilary Chidi, EVP, global credit risk solutions and chief sustainability officer at TransUnion.
“Superior insights lead to better decision-making for lenders, and, in turn, the right opportunities for consumers. In these challenging times of stubbornly high inflation and rising interest rates, it is even more important to have a holistic view of a consumer’s financial position.”