The fintech landscape is quickly becoming larger and more competitive. Fintech is here to stay. In my view, fintech companies are generally more flexible, have low costs and are more open to new technologies. Fintech companies seem to better understand human behaviour and have a superior value proposition with which they are more able to create real value for customers, for example with a frictionless customer journey. On the other hand: financial institutions ‘have’ the customers and data, but move slowly, miss new digital skills and have a high cost/income ratio. It seems evident that strong partnerships between fintech and financials will bring the most now. Credit risk has doubled since the 2007 credit crunch. Banks, credit card providers, e-tailers, telco operators and utility providers have a strong backward focus when it comes to managing their financial risk. Often, they predict capital reservations to be the same as over the past years. Also, they apply super traditional undifferentiated and expensive treatments when customers default or churn. And they face difficulties onboarding customer segments.
Fast changing consumer behaviour
Globally there is a lack of reliable credit information. According to 2017 World Bank data, only 30.8% of the global population is listed in a private credit registry with information on repayment history, unpaid debts or credit outstanding. This makes it hard for lenders to assess the risk and creditworthiness of a new thin file customer using traditional credit score models. Often this results in rejecting the application for credit whereas many of these people may be creditworthy. Consumers’ and SME’s behaviour and needs are changing fast. Self-directed millennials force new values including a new digital customer experience. Because of the immense data explosion with structured and unstructured data, only big data driven models, Machine Learning algorithms and Artificial Intelligence (AI) can tackle this to serve the right solutions to the right customer. Traditional technology is simply not able to deal with these challenges.
The good news: the solutions exist. Behavioural driven risk predictions and treatments on an individual level will increase acceptance rates, reduces defaults, lower costs and improve customer satisfaction.
Together with UK Finextra Research, AdviceRobo conducted a survey of leaders from financial institutions. For better and responsible lending, 75% value big data applications as beneficial for better risk assessments. 83% of the lenders see machine learning based scoring as a major help in proper risk assessments. This shows that the industry itself sees the opportunity of using new technologies for credit scoring. So, why wait?
Psychology meets technology
AdviceRobo uses new digital technologies to extend access to financial services. We are convinced that technology makes the difference to achieve financial inclusion. That is why AdviceRobo brings a new credit score and risk approach.
Based on motivational insights, AdviceRobo developed a psychometric credit test to add non financial data of thin file consumer segments. By applying these big behavioural data and machine learning we are able to reveal additional information so a lender can assess people’s risk better.
AdviceRobo offers this solution as a white label plug in to be integrated in the on boarding. Applicants fill out an online interview and within seconds the lender gets the applicants credit score and a profile via an API. Based on this, he instantly can approve or reject the applicant. Validation and calibration is done with a feedback loop where a lender regularly provides anonymized data. This secure technology has proven to increase acceptance (on average +15%) at same or better risk levels (up to 38% lower than average default rate). That is how we ride the waves, feel free to join.
About The Company
Founded in 2013, AdviceRobo is an international credit scoring company applying psychometrics to support lending. Our aim is to financially include every citizen on earth, equipping men and women to become better borrowers by preventing financial risks. To seriously increase global financial wellbeing, we believe that everyone should have access to capital.
AdviceRobo has a client base comprising (next gen) banks, credit card providers, mortgage IFA’s and crowd funding platforms. Headquartered in Amsterdam & London, the company has operations all over Europe and in Latin America. The company was listed in 2017 KPMG & H2 Ventures global Fintech100 and The 2017 European FinTech50, the 50 hottest fintech firms in Europe.
Being a successful entrepreneur for years now, taught me to ride the waves. Making use of change, e.g. the upcoming changes in regulation or consumer behaviour. Being disruptive at the right moment and dare to pivot the company are crucial for success. Also, I learned the achievements of a company depend on the people around, the balance, the combination and the interaction of different personalities. Motivating people to be an entrepreneur themselves, being inspirational and challenging the team to think and act out of the box makes me go beyond my happy graph. The effect of making a compliment instead of firing someone at a big mistake in a start up phase is of great value. To organise and stimulate feedback from the team as well as customers, intrinsically listen to that and act on that is the key to success.
About The Author
Diederick van Thiel is CEO and Co-founder of AdviceRobo. 20 years of leadership in boards of Vodafone, KPN Mobile, ING and currently Ikano. Since 2009 FinTech entrepreneur founding and growing robo advice companies like eyeOpen (sold to Aegon TransAmerica), AdviceGames and AdviceRobo. Super passionate about the crossing between technology and psychology, digital strategy, leadership of successful innovations, value creation from innovation and new business modelling and surfing.