How Is Alternative Data Powering the Future of Lending?
Highlights:
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To meet evolving consumer demands for personalized and supportive financial experiences, businesses must leverage alternative data beyond traditional credit scores to gain a holistic view of a customer's financial life.
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Integrating alternative data improves marketing effectiveness, accelerates account approvals for a broader demographic, and enables proactive, real-time account management, ultimately fostering stronger customer loyalty and better risk management
In today’s fast-moving world, financial institutions can't produce products that are simply “good enough.” Consumers expect more. They want easy, helpful, and personal experiences that support their financial health. But this isn’t just a new trend. It’s a big change in how people see and use financial services.
Education & Support → Better Customer Experience
Customer experience is now a major reason people choose a financial provider. In fact, 80% of consumers expect their bank or credit union to help improve their financial well-being. Even more, 60% say they would switch to another provider for better financial education.
People don’t just want loans and accounts. They want support, advice, and tools to manage their financial life better. That’s why banks and lenders need to focus on fast, personal, and smooth digital experiences — especially as we head into 2025.
To do that, they need to understand more about their customers’ lives. And that means looking beyond just credit scores.
Credit Scores And Alternative Data Can Create a More Complete Picture
For many years, credit scores were the main way financial institutions judged someone’s risk or behavior. While credit reports and scores remain a strong indicator of creditworthiness, there are even more opportunities with the addition of more data. Millions of Americans don’t have much credit history at all, being considered either thin file or “credit invisible.”
To really know someone’s financial position, lenders can evaluate:
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Credit and debt
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Income and savings
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Wealth and spending habits
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Financial durability
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Employment history
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Income Information
That’s where alternative data comes in.
What Is Alternative Data?
Alternative data is nontraditional financial information that shows how people live, earn, and spend. This can include:
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Rent and utility payments
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Bank transactions
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Employment and income history
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Investment account data
Using this data helps lenders see the full picture — not just the score.
How Alternative Data Improves the Customer Journey
Better data leads to better experiences. Here are three ways alternative data makes a difference:
1. Marketing
Younger people, like
Gen Z, are investing early — with Gen Z consumers starting at an
average age of 19. If financial institutions use investment data,
they can target young investors with personalized offers that make
sense. This strategy could increase marketing success by up to 53%.
2. Account Opening
About 35% of
Americans rent their homes. Rent is a major monthly cost, yet it’s
often ignored in credit checks. Including rent payments could help
more people get approved faster. In fact, it could help 17% more
borrowers qualify for a mortgage.
3. Ongoing Account Management
Life changes, like job loss, may not show up in credit reports
right away. But consumer-permissioned bank transaction data can show
those changes in real time. This insight helps lenders react quickly
— offering help when needed or rewards when deserved. It could even
help 4 million more people qualify for better credit offers.
The Bottom Line
A person’s financial experiences are personal. And good experiences build trust. By using alternative data, banks and lenders can offer:
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Smarter, more personal offers
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Faster approvals
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Stronger customer loyalty
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Better risk management
The future of finance is data-driven. And the organizations that use deeper insights today will be the leaders of tomorrow.
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