Wider access to financial services in emerging markets is to be made possible by a new initiative between VisualDNA and Experian.
Experian, the global information services company, is working with VisualDNA, the leading provider of psychometric testing for the credit and risk sector, to help provide financial services to people in emerging markets that are unbanked or underserved as a result of the current approach to credit scoring.
VisualDNA’s pioneering techniques use image-based quizzes that provide a reliable indication of a person’s creditworthiness in cases where there is very little or no formal credit history. VisualDNA’s unique analysis of personality traits and cognitive biases predicts how people are likely to manage their finances, how they will use credit products and whether they will repay or not.
Experience to date shows that this unique approach can deliver up to 50% higher acceptance rates for credit, and a 23% reduction in default rates. This new development in scoring benefits both customers and service providers by increasing the number of loans that can be made available and provides a minimum increased return on investment (ROI) of at least 5 times.
About 2,5-billion of the world’s adults do not use formal banks or semiformal microfinance institutions to save or borrow money. This is despite the fact that studies have shown how microfinance results in a 30% increase in the creation of new businesses and can significantly improve an applicant’s quality of life.
In a study carried out by VisualDNA, 80% respondents said that being given access to additional financing would allow them to spend more money on education. It is also shown that two extra years of education would add 10 years to life expectancy and a complete primary education could increase earnings potential by 27%.
To enable access to this huge underdeveloped market, VisualDNA and Experian will be working with a range of lenders to offer the service to millions of people in emerging economies. Psychographic data provided by consumers as part of the quiz provides forward-looking insight that can be used independently of other data sources, enhancing decision accuracy and improving default prediction, especially in instances where credit histories are not available.
The approach is also completely compliant with international data protection and privacy laws; neither Experian nor VisualDNA will collect or hold any personal data on people as part of the process. The new initiative with VisualDNA compliments Experian’s existing portfolio of credit scoring and decision analytics’ solutions. The success of the partnership is already being seen in the new clients Experian has signed up in South Africa and Turkey.
Clare McCaffery, MD: Credit & Risk at VisualDNA, comments: “VisualDNA’s goal is to help people be valued for who they really are. Access to traditional lending is often a catch 22 with a lack of credit history preventing access. Our technology has the potential to break this cycle and change people’s lives for the better.
“Our research indicates that 80% of people given access to additional financing would use the money on education, something that has a profound impact on their future health and earning potential. The work we are doing with Experian is incredibly exciting and the results we have from our testing phase indicate that millions of people could benefit in South Africa and Turkey alone.”
Charles Butterworth, MD of Experian EMEA, adds: “Our partnership with VisualDNA builds on Experian’s position as a leading provider of decision analytics and scoring solutions.
“It means we can offer our clients new and proven ways to extend their services to many more people in emerging economies and this, in turn, means many people previously unable to obtain credit will have the opportunity to significantly improve the quality of their lives and advance their local economies through sustainable growth.
“This partnership offers people in emerging economies a serious and viable step up the economic ladder and we are working closely with our clients in a number of countries who are similarly committed to making this a success.”