One in 5 US adults — more than 60 million consumers — currently sit outside the credit ecosystem or lack sufficient credit data to be scored by traditional risk models.1 While this has financial institutions and insurance carriers looking to support these marginalized communities and tap into new sources of growth, many are seeking deeper insights and best practices as these industries turn their focus toward a more inclusive marketplace.
In response, TransUnion recently brought together senior executives from the US financial services and insurance sectors to partake in an inaugural Financial Inclusion Forum. The primary focus was on discussing ways to meet and engage marginalized consumers — particularly those within credit unserved and underserved segments and who do not traditionally have access to credit or insurance — through more responsible lending and policy underwriting practices. Ultimately, the topics covered during the forum revealed three key tenets for lenders and carriers [AT1] [CS2] looking to fill in the gaps and advance more inclusive practices:
Financial inclusion starts by meeting underserved consumers where they are and empowering their paths to financial literacy. By providing interactive educational resources, lenders and carriers not only help consumers better understand the financial ecosystem, they can also promote credit savviness and confidence. These resources might include relatable content that connects to consumers’ values, beliefs and lived experiences; tools for personalized action plans around managing and improving consumers’ financial situations; and access to credit health solutions designed to help consumers successfully build good credit habits.
Establishing trust with underserved populations — for whom a reliable source of information is important — not only enables consumers to access the resources and credit services they need, but sets the foundation for sustainable, mutually beneficial relationships. Earning this trust can start by promoting educational resources through accessible channels, or creating associate outreach programs to engage with community members. Lenders and carriers can also work with organizations that have established themselves with target consumer segments (not unlike TransUnion’s partnership with the NAACP) to distribute co-branded, educational content, or leverage relatable spokespersons to promote their brands.
Lenders and carriers can become relevant and trusted by underserved communities through enriched user experiences. This includes offering products and services designed to meet the unique needs of these consumers, and requires the ability to overcome perceived barriers in order to successfully target and attract those you seek to serve.
To do so, businesses can leverage non-credit-based insights — including data from demographic, behavioral and geographic sources — to identify underserved consumers and create targeted marketing lists. The same insights and data can be used to craft personalized messaging, demonstrating to consumers their credit needs are known and being addressed. Furthermore, offering an inclusive onboarding experience — during which businesses educate consumers on the benefits of participating in the mainstream financial and credit ecosystem while fostering brand loyalty — builds trust and transparency right into the application process, and can make historically underserved populations feel understood and valued.
The third lever for advancing financial inclusion involves leveraging innovation to create holistic views of underserved consumers to achieve more inclusive decisioning. As shared by FinRegLab CEO Melissa Koide during the forum, these insights can be found by using predictive alternative data and advanced analytics techniques. Per Koide, this data is highly promising in its ability to assess risk and evaluate unserved and underserved consumers, and is quickly becoming more digitally accessible. And although oversight protocols are still evolving, it could help pave the way for faster underwriting while helping streamline manual decisioning typically required for consumers with little or no credit history.
As the industry continues to evolve, TransUnion proactively researches and continues to refine a fairness testing framework to improve consumer evaluation strategies. This involves assessing outcomes for disparate impact, and improving model governance and transparency in decisioning — particularly when using alternative datasets and advanced analytics.
There are also new and innovative B2B2C models where a real-time, second look can help financial institutions drive sustainable growth. For instance, Pagaya , a global tech company and provider of an intelligent decisioning network for lenders, leverages TransUnion data to augment traditional means of risk evaluation — ultimately helping lenders extend credit to more consumers.
TransUnion is committed to keep evolving and embracing a more equitable credit ecosystem. Reach out to your TransUnion representative to learn more about our alternative data solutions and upcoming product releases.
1US census and TransUnion US consumer credit database