Recession Readiness Insights

How Fintechs Can Optimize Data Spend

How Fintechs Can Optimize Data Spend

April 20, 2023 | Sharla Godbehere

Fintech companies are disrupting the financial industry. In times of economic uncertainty, the reality of implementing disruptive solutions can increase odds of operational challenges and slim earnings. According to Accenture, 40%- 50% of fintech firms report negative earnings before interest and taxes (EBIT)*. One way fintechs can mitigate these challenges is to optimize their data spend, by focusing it on identifying opportunities, risk management and fraud mitigation efforts.

1 - Ways data spend can help identify opportunities

Fintechs want to extend their most profitable relationships, that means identifying those opportunities. Financial capacity insights can be a valuable way to stretch data spend to achieve this goal. By leveraging consumer permissioned data that can provide valuable insights on banking/cash-flow behavior (e.g. Debt to income modeling, etc.), fintechs can find customers with a higher chance of responding to targeted programs. This type of data also helps identify customers open to up-sell/cross-sell opportunities. Providing a great value from data spend. In fact, one Equifax client used financial capacity insights to discover customers with higher lifetime value (LTV) potential. This resulted in a 5% increase in overall LTV.**

2 - Ways to optimize data spend can provide insights to help cut risk

Fintechs should also optimize data spend to cut delinquency and default risk. Alternative data helps identify those that fall within a desired risk tolerance profile. Especially when it comes to those that do not pass traditional credit screening. By leveraging data such as communications, pay TV, and utility payment history, trending data and NeuroDecision® Technology, fintechs can score more applicants. Optimizing data spend to bring fintechs more opportunities while mitigating risk. In fact, fintech customers have found that they can score 5%-7% more applicants without increasing risk as compared to a leading industry risk score.**

3 - Ways to leverage data spend to more effectively battle fraud

Fraudulent activity is also a significant concern for fintechs.  Preventing fraud starts with simplifying the application process, improved authentication and compliance checks. This is why it’s a key area to focus your data spend. This requires ensuring your data spend is focused on digital, real-time solutions that help easily verify identities and simplify the application process. In fact, Equifax found digital real-time solutions provide a 90% reduction in fraud risk. Also a potential 30% reduction in operational overhead.** This example underscores the value of prioritizing fraud solutions in your data spend.

Fintechs can always buy more data. However, optimizing their data spend means selecting datasets that add incremental value. For optimal value, data spend should identify opportunities, manage risk, and mitigate fraud. These outcomes help fintechs continue to deliver innovative solutions. To learn more ways on optimizing read our blog on how to Use Analytics to Find Fast, Direct Paths to Profitability


**Equifax Data


Sharla Godbehere

Sharla Godbehere

FinTech Leader

Sharla leads the team focused exclusively on the rapidly evolving FinTech industry. She connects the power of data, technology, and analytics with today's future-designing companies to expedite responsible growth in lending. Sharla assists FinTechs and alternative lenders in leveraging Equifax’s unique data to make bet[...]