One in five U.S. adults – more than 60 million consumers – are either outside the credit ecosystem or lack sufficient credit data to be scored by traditional risk models, leaving many underserved. To better support marginalized consumer segments, TransUnion (NYSE: TRU) brought together senior leaders in the financial services and insurance industries at its inaugural Financial Inclusion Forum.
The group of executives discussed ways to meet and engage consumers where they are on their financial journey and to create and deliver equitable products and services for them, opening new sources of business growth while building long-term resiliency and prosperity for underserved families.
“Financial inclusion is core to TransUnion’s mission of Information for Good because we believe all consumers should have the opportunity to participate in the credit ecosystem. Economic growth is strongest when participation is at its highest,” said Steve Chaouki, President, U.S. Markets and Consumer Interactive, TransUnion. “To make meaningful change, we convened leaders from the financial services and insurance industries – 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 marginalized consumers and allow these businesses to grow.”
Empower, Engage and Evaluate
The Financial Inclusion 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.
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As well, the Forum included a fireside chat that showcased how a partnership between TransUnion and Pagaya used 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 honored 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, Chief Growth Officer, Pagaya. “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.”
Financial Inclusion a Balancing Act
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.
A recent TransUnion study found that, 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%, many consumers in older generations also opened credit for the first time: Millennials (21%), Gen X (11%), Baby Boomers (6%) and Silent (1%). A key takeaway from the study: NTC consumers are generally good risks when compared to other established borrowers with similar credit risk profiles.
“A delicate balance exists for organizations to support consumers while still managing risk within their portfolios,” said 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.”
To get a more complete picture, lenders are leveraging solutions such as TruVision Blended data, which includes an array of trended data and alternative data assets. Recently, a mid-sized lender complemented its use of VantageScore credit risk scores by incorporating TruVision Blended data.
As a result of utilizing both TruVision Blended data and VantageScore data, the lender was able to accurately score more than 90% of applicants returned as “no-hit” or “thin-file” by traditional credit models. TruVision Blended data was also able to score 99% of the lender’s loan applicants, delivering enhanced results over other scores.
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