TransUnion introduced its new CreditVision credit scoring solution, changing how lenders offer credit to South African consumers while providing consumers with more opportunities.
A recent TransUnion study identified 3-million consumers who previously could not gain access to credit using traditional scoring models. With CreditVision’s alternative and trended data, financial institutions can see these consumers in a different, more positive light.
Traditional credit scoring models only provide a limited view of a consumer at a specific point in time. TransUnion is the first credit bureau in South Africa to utilise alternate and trended data to gain a more holistic view of a consumer and identify trends in their credit behaviour.
“When lenders use this information and can access it broadly across the consumer wallet, it allows them to better tailor their products to consumer performance, which builds better loan relationships and helps everyone in the long run,” says Lee Naik, CEO of TransUnion Africa.
He adds that this is a proven TransUnion model which has already seen success in the US, Canada, India and Colombia.
“Our colleagues in Colombia identified an additional 4.7m consumers (13.1% of the credit active population) using this approach. We now have the opportunity to unlock this type of potential locally, and drive financial inclusion and growth in the South African financial services sector,” said Naik.
In South Africa, the potential benefits are clear. “We have seen as much as a 56% increase in risk predictability when using our CreditVision model locally. In addition, we have seen as much as a 20% improvement in approval rates and a 29% decrease in bad debt amounts,” says Naik.
A survey of 1 000 South Africans found that consumers would support this approach, with around 63% of respondents indicating they would approve of financial institutions understanding more about them with the knowledge that it could provide a more comprehensive view of their credit health. This could lead to improved interest rates and more access to credit for them.
“We all need to play a part in tackling the lack of financial inclusion in South Africa, and we feel that TransUnion’s CreditVision can play a key role by allowing people to access the credit they need at a cost that reflects their true risk profile and ability to repay,” Naik says.