BSP explores alternative data use to promote financial inclusion

The Bangko Sentral ng Pilipinas (BSP) is urging the industry to explore the use of alternative or non-traditional consumer data in its efforts to design, improve, and deliver financial services.

“With alternative data, a more complete picture of the client is painted thus allowing for more individuals and businesses to be assessed,” BSP Governor Benjamin E. Diokno said during a recent webinar by the FinTech Alliance Philippines and TransUnion themed, “Data-Driven Road to Financial Inclusion.”

Unlike traditional data which is composed of bank transactional data and credit bureau information, alternative data come in several forms, including social media, mobile data, utilities data, behavioral data, online transactions, geolocation data, and browser data, among others.

Forecasting creditworthiness is one promising use case of alternative data, especially since many Filipino adults and MSMEs still do not have or have little credit history.

In a September 2021 rapid survey by the BSP, respondents cited better customer profiling, improved pricing of loan products, and lower default rates as the realized benefits of using alternative data. While it took an average of two years before the benefits are realized, the potential is significant, suggested Diokno.

“The use of alternative data for credit scoring is just one example of how data can be used to benefit consumers. Looking ahead, we must continue to take initiative in fostering an inclusive digital financial ecosystem,” the Governor said.