What Happened to Alternative Data?

Posted by Greg Cote on September 18, 2018

alternative data

Lenders need to offer alternative data tailored for the communities they serve, as well as insights into the consumers in those communities. In this blog, learn how we are providing financial service organizations the alternative 'alternative' data, customer identity intelligence, and responsive service they need to deliver great products to a growing and profitable market.

What is Alternative Data?

A customer who runs a successful payday lending operation in the U.S. startled me the other day with a question. He wanted to know what happened to the world of alternative data.

His question caught me off guard. After all, his business of providing small-dollar loans to financially underserved customers wholly depends on alternative data. (“Alternative data” is data about unbanked and underbanked consumers who have been largely shut out of the mainstream market for financial services.)

Why You Need More Than Just Alternative Data

As we talked, it became clear that our customer's question was really an expression of exasperation at how things were shaping up elsewhere in the financial services market.

  • Point number one - It turns out that alternative data by itself doesn’t provide all the intelligence that lenders need for making the most profitable business decisions. They also need advanced analytics, taking advantage of every applicable advance in Artificial Intelligence (AI) and machine learning to yield the most comprehensive and accurate insights from the alternative data they collect.

This isn’t conjecture. At Accelitas, we’ve seen this truth borne out in engagements with lender after lender. It’s something our customers appreciate about our Accelerated Insight® API platform and our professional services organization. Our data scientists are hands on, working closely to pick the right indicators and algorithms to deliver the most predictive results for each customer.

  • Point two - The market is undergoing consolidation, and while the mergers and acquisitions (M&A) deals involved in this consolidation certainly validate the idea of alternative data, they do nothing to actually help companies like his.

How Major Mergers and Acquisitions Are Making Things Difficult

Here’s what our customer was getting at...

In the past year or so, all the major credit bureaus in the U.S. have purchased alternative data vendors. Traditionally, the big bureaus collected lots of data about prime customers, but little data about non-prime customers, including Generation Z consumers (the generation after Millennials) and recent immigrants.

But non-prime customers now represent about a third of households - (30% of the U.S.!) - and that’s simply too big a market for the credit bureaus to ignore. They had already tapped the prime market. Non-prime was clearly next. Hence the acquisitions.

But acquisitions change things. Several alternative data vendors have been swallowed whole by the big credit bureaus. And once they were acquired, they became a bit like the credit bureaus themselves. Bureaucratic. Big, slow, and unresponsive to their specific needs.

M&A deals are inherently difficult. There’s always a bit of confusion. And attrition. Everything takes a little–or a lot–longer than people expected. And that’s even assuming the two companies’ cultures fit together. It seems like at least half the time, they don’t.

Alternative Data Is Supposed to be Fast and Innovative

These days, my customer finds the acquired data vendors slow to respond, unlikely to customize, and all too ready to deliver a generic product, probably at a higher price.

Hence his exasperation. The world of alternative data and alternative lending is supposed to be fast and innovative. But my customer has been finding it hard to run a fast-paced company in a competitive market if vendors aren’t responsive.

That’s why he’s now a customer of ours. We’ve been focused on alternative data as long or longer than any of these other vendors. But we’re still nimble and responsive. And we provide a complete solution of alternative data and patented AI analysis that’s delivering results in the form of higher profits and lower losses.

Lenders Still Need an Alternative Resource

If the rest of the alternative data market has been lost to the bureaucratic travails of unwieldy M&A deals, then what companies like our customer need is an alternative “alternative” data provider.

Lenders need an alternative resource that offers both alternative data tailored for the communities they serve, as well as otherwise-impossible-to-come-by insights into the consumers in those communities. They also need personalized and customizable service.

At Accelitas, we’re nimbly providing lenders and other financial services organizations the alternative, alternative data, customer identity intelligence, and responsive service they need to deliver great products to a growing and profitable market.

Our customer might question what’s become of some other vendors, but he’s not questioning his decision to choose Accelitas. The business results we deliver are plain to see.

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Tags: Identity Intelligence, Customer Identity Intelligence, Artificial Intelligence, CU Direct DRIVE, Alternative Data