Our data team recently carried out a proof of concept for a client in Spain, with the task of helping the client evaluate the probability of their customer default using account information. In essence - turning account statements in to risk scores.
The results were stunning — not only did our scores prove to be very predictive, but we outperformed a major credit bureau by 12% measuring the GINI coefficient.
Here is an illustration of the results:
“Benchmark scores” included client's proprietary data and features; “Credit Bureau” included a set of variables related to credit history; “Nordigen” included variables generated from account information.
The clear advantage of account data is information about income and spending behaviours of private individuals. This information cannot be found in any traditional credit reports. On top of this, account data includes information about active liabilities — for example, monthly regular payments to a lending institution can be used as a proxy for an active loan. This is particularly useful in countries, where credit bureaus don't have a positive register.
That being said, there are two key takeaways from the test:
account data and credit bureau data capture different behaviours and the best results are achieved when both data sources are combined;
scores generated from account information can be more predictive than credit bureau data.
Have you tested account data in credit scoring models before?
Leave a comment below.
Nordigen helps banks and alternative lenders approve more creditworthy customers by leveraging account information — from helping lenders verify customer income to building complex risk scores from account information.
More information: https://nordigen.com/
Here’s what we've been up to recently.
In recent years, tech giants like Apple, Google and Amazon have started planting flags in the financial sector, intruding on traditional financial institutions. Facebook is finally joining the race with Libra, its digital currency described as a “simple global currency and infrastructure that empower billions of people.”
As a society, we are gradually moving away from paper cash, increasingly gravitating towards alternative digital payment methods - contactless-cards, cryptocurrency, mobile and wearable technology. Regulatory driven initiatives like EU's PSD2 and UK's Open Banking are propelling financial innovation and enabling the emergence of new products and services.