Alternative Models of Credit Scoring: New Options, New Risks

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Mercator Advisory Group’s new research report examines innovations in credit scoring and alternative lending.

One of the 15 exhibits included in this report

In order to maximize lending opportunities, lenders must stay at the forefront of credit scoring innovation. Some innovations are exciting but have not been proven through stressful business cycles, so be certain to balance risk and reward.

Automated credit scoring, an innovation pioneered by FICO during the 1950s, serves the global credit card business well, but saturated markets need to develop new customer streams to fuel growth and offset attrition.

New methods to discover potentially creditworthy new customers outside the bounds of traditional credit scoring are emerging for both consumer credit and small business credit. Credit cards have a particular need to reach beyond traditionally saturated customer segments such as high net worth and mass affluent. Small businesses with limited credit history also have an urgent need for credit.

Mercator Advisory Group’s latest research report, Credit Scoring as a Competitive Differentiator, discusses how traditional score functionality adapts to the current market and the potential of disruptive models.

“In order to maximize lending opportunities, lenders must stay at the forefront of credit scoring innovation,” comments Brian Riley, Director, Credit Advisory Services, Mercator Advisory Group, author of the report. “Some innovations are exciting but have not been proven through stressful business cycles, so be certain to balance risk and reward.”

Highlights of the research report include:

  • Alternative lenders posing retention issues for traditional institutions
  • Reaching underserved customers
  • Alternative methods for determining creditworthiness
  • A new approach to customer engagement
  • Using credit scoring to build deeper customer relationships

This report contains 28 pages and 15 exhibits.

Companies mentioned in this research report include: Barclaycard US, Branch.co. Consumer Financial Protection Bureau (CFPB), Equifax, Experian, Federal Reserve Bank of Philadelphia, Federal Trade Commission (FTC), FICO, Capital One, Discover, Lending Club, Lenddo, LexisNexis, Mintel Compremedia, On Deck Capital, Prosper Marketplace, Small Business Financial Exchange (SBFE), Social Finance (SoFi), TransUnion, US Department of the Treasury, ZestFinance.

Members of Mercator Advisory Group’s Credit Advisory Service have access to these reports as well as the upcoming research for the year ahead, presentations, analyst access, and other membership benefits.

For more information and media inquiries, please call Mercator Advisory Group's main line: (781) 419-1700, or send email to media@mercatoradvisorygroup.com.

For free industry news, opinions, research, company information and more, visit us at http://www.PaymentsJournal.com.

Follow us on Twitter @ http://twitter.com/MercatorAdvisor.

About Mercator Advisory Group
Mercator Advisory Group is the leading independent research and advisory services firm exclusively focused on the payments and banking industries. We deliver pragmatic and timely research and advice designed to help our clients uncover the most lucrative opportunities to maximize revenue growth and contain costs. Our clients range from the world's largest payment issuers, acquirers, processors, merchants and associations to leading technology providers and investors. Mercator Advisory Group is also the publisher of the online payments and banking news and information portal PaymentsJournal.com.

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Karen Yetter
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