Alternative Consumer Data:
What You Should Know
How financial inclusion in consumer lending
can be achieved using alternative credit data

Financial inclusion and improved pricing strategies are ranked
among the top business drivers for using alternative credit data
Approximately 20% of U.S. adult consumers have little-to-no
credit footprint with traditional credit risk evaluation tools,
leaving opportunities on the table.1

Alternative data sources can provide financial institutions
with a clearer picture of a consumer’s financial health andcredit risk — improving opportunities for revenue growthand financial inclusion.
Improved pricing strategies, enhanced risk mitigation andless customer friction are all business drivers for alternative
data use, but being able to reach previously underserved
markets was the top ranked advantage of using alternative
data (44%) reported by survey participants in our 2023
LexisNexis® Risk Solutions Alternative Credit Data Impact
Report.2 This is especially true for consumer-focusedmarketing efforts seeking improved pricing strategies (60%).
The use of alternative data has positively impacted
revenue growth, with a majority of firms saying theirrevenue has increased by at least 15% and nearly halfof tier 1 banks seeing 25-49% growth in revenue.

Advantages of using alternative data (% ranked as top advantage)
Overall(N = 225)

Reach previously
underserved market

Marketing/Consumer(N = 65)

44%

Credit/Consumer(N = 61)

51%

44%

Better mitigate risk with a more
holistic credit risk assessment

23%

20%

15%

Balance speed of approvalagainst customer friction

19%

15%

23%

Deliver optimized offers for
credit and services for customers

15%

14%18%

Self-reported adoption level:

Leader = 57% / Fast follower = 35% / Laggard = 39%

Ranking improved pricing
strategies as top driver ofalternative data use = 60%

Notably, firms that self-reported as being leaders in alternative data
adoption (57%) have been very likely to realize this benefit and canserve as a lighthouse reference to others. Many financial institutions(35%) perceive themselves to be a fast follower, contributing to thesteady growth of alternative data adoption.
2

A significant majority of lenders use alternative data to assesscredit risk for at least half of new consumer account applications
Alternative credit data increases a lender’s ability to score and evaluate over90% of credit invisible consumers.

The limitations of traditional credit data have made it increasingly difficult
for financial institutions to assess the creditworthiness of individuals
with limited credit history. Addressing this visibility gap and reaching
more credit invisible consumers requires a new perspective on credit riskand opportunity.
A significant majority of financial institutions (91%) are frequently using
alternative data to assess credit risk and gain a more robust view offinancial health for at least half of new account applications. Manylenders use alternative data in combination with traditional data to evaluate
new applications and drive portfolio growth. Organizations with financial
inclusion as their top objective (45%) are particularly likely to use alternative
data for all new consumer account applications. Lenders are also likely toapply alternative data to assess traditionally scoreable applicants to identify
additional financial inclusion and fairness opportunities.

91%

Frequency of using alternativecredit data on new applicantsOverall(N = 225)

Consumerapplications(N = 126)

Fewer than 25%

1%
8%
29%
36%
26%

0%
9%
26%
40%
25%

More than 25% but less than 50%
More than 50% but less than 75%
More than 75% but less than 100%
All applications
Top objective for using on all applications:• Financial inclusion = 45%• Improve segmentation = 25%• Improve swap in/swap out = 8%

of financial institutions are frequently
using alternative data for at least halfof new account applications.
3Financial inclusion continues to drive adoption.

Many financial institutions perceive themselves to be a fast follower with alternative
data adoption. Lenders with financial inclusion as a top objective (55%) and/or
a loan portfolio exceeding $1B (57%) are more likely to see their organization asa leader in using alternative data (37%). Respondents with a credit-risk role focusing
on consumers are also more likely to consider themselves as adoption leaders (46%)
than respondents in the commercial lending (33%) and marketing (36%) spaces.

Alternative data adoption status
Top objective for adoption:• Financial inclusion = 55% (Banks 62%)
• Improve segmentation = 37%• Improve swap in/swap out = 24%

13%

Loan portfolio• $1B+ = 57%• <$1B = 15%

Overall(N=225)50%■ Leader13%■ Fast follower ■ Laggard

37%

Credit/Consumer(N=61)

41%

12%
46%

Marketing/Consumer(N=65)

36%

52%
4

Overlooking credit invisible and thin-fileconsumers could be a missed opportunity
Leveraging alternative credit data insights enables lenders
to reach deeper into the credit spectrum, expanding
access to affordable financial products for traditionallyunscorable consumers.

Alternative credit scores can uncover significant changes
in creditworthiness within customer segments which may
be missed by traditional credit scores, including early indicationsof financial instability among prime customers. Alternative credit
data can also help detect signs of recovery among non-prime
consumers whose potential for growth is underestimatedby traditional credit bureau scores.
Financial institutions are most likely to use alternative
data in their credit risk assessment of deep subprime (82%),
subprime (82%), and near-prime consumers (68%). Lenderswho consider themselves adoption leaders are highly likely
to use alternative data to refine prime consumer segments.

Use of alternative data for credit risk assessment
by consumer segments
Overall(N = 225)

Marketing/Consumer(N = 65)

Credit/Consumer(N = 61)

Unscorable/Deepsubprime consumers

82%

80%

82%

Subprime consumers

82%

78%

85%

72%

74%

Near-prime consumers
Prime consumers
Super-prime consumers

68%
52%
31%

45%

56%

18%

26%

Leaders of alternative data adoption are
particularly likely to use it when assessing
the credit risk of prime consumers.
5Adoption of alternative credit data can impact emerging
consumer segments and improve the customer experience
Credit invisible consumers are approved 85% lessoften than traditionally scoreable consumers.3

Demographics impacted by alternative data

Young adults withlimited credit history

Overall(N = 225)

Marketing/Consumer(N = 65)

Credit/Consumer(N = 61)

77%

62%

68%

New immigrants withlimited credit history

62%

58%

67%

Those not in the workforce

59%

58%

67%

Students with limited
credit history

57%

52%

54%

Individuals with bad credit

56%

49%

52%Foreign investors withlimited credit history

44%

Individuals aged out of credit

29%

Underserved minorities

28%

Top objective for adoption:• Financial inclusion = 60%• Improve segmentation = 41%• Improve swap in/swap out = 35%

45%

41%

34%

36%

23%

36%

Alternative data has helped financial institutions assess
the credit worthiness of individuals with limited credit
history and those with sub-prime credit, such as young
adults (68%), new immigrants (62%), the unemployed(59%), students (57%), and foreign investors (44%).

Deep subprime, subprime,and near-prime individuals are
the targeted customer segments
Traditional credit files may not give a detailed enoughpicture to assess consumer risk, resulting in thesedemographics being disproportionately excluded
from lending portfolios. But with the right data driving
increased transparency, many in this population could
be approved and become loyal customers.

6Organizations are recognizing the benefits of alternative data.

Identifying opportunities for customers who might not have qualified otherwise
is the top ranked benefit for an improved customer experience in consumer
lending (72%). Many marketing decision makers (68%) also point to increasedtransparency for customers with limited to no credit history, such as knowing
what goes into their credit risk assessment, as a benefit of using alternative data.

Benefits of using alternative credit data for customer experience
Overall (N=225)

Marketing/Consumer Overall (N=65)

Opportunity for customers
who might not have qualified

72%

Those with limited credit history
benefit from more transparency

64%

Presenting customers optimized
offers for credit and services

62%

Opportunity for customers
to obtain better rates

56%

Speeds up time to approval

54%

Prevent approvals of those
who might not repay
Alternative data has notprovided any CX benefits

72%
57%

58%

70%

58%

57%

51%

64%

46%

30%
1%

74%

68%

42%

Minimizes customer friction

Credit/Consumer Overall (N=61)

33%

29%
2%

34%
0%

7

A new solution for financial inclusion
Our goal is to help the financial services industry build a more robust
view of consumer credit risk by creating new alternative data solutions
that help lenders gain a clearer understanding of an applicant’s
creditworthiness. LexisNexis® RiskView™ credit solutions can help
lenders to increase approval rates, improve profitability and manage
risk thresholds across the customer life cycle. This powerful solution
suite draws on a broad range of alternative data — providing insight
into key risk factors that traditional credit data may miss.

Ready to improve credit risk assessment
across the customer life cycle?
Learn more:risk.lexisnexis.com/products/riskview

Sources:
1. LexisNexis® Risk Solutions, 2021.
2. LexisNexis® Risk Solutions, 2023. “Alternative Credit Data Impact Report.”
3. LexisNexis Risk Solutions, 2018.

LexisNexis® Risk Solutions harnesses the power of data and advanced analytics to provide insights that help businesses and governmental entities
reduce risk and improve decisions to benefit people around the globe. We provide data and technology solutions for a wide range of industries
including insurance, financial services, healthcare and government. Headquartered in metro Atlanta, Georgia, we have offices throughout the world
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For more information, please visit www.risk.lexisnexis.com, and www.relx.com.
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