July 11, 2023

Unveiling The World’s First Underbanked Inclusion Score – Part 4

Unveiling The World’s First Underbanked Inclusion Score – Part 4

In earlier segments of our series, we revealed how 1DataPipe’s ID & Fraud Risk and Credit & Behavior Risk Scores, intrinsic elements of our innovative Living Identity Scores, arm financial institutions and fintech firms with exhaustive and cutting-edge tools for identity verification, fraud detection, and credit risk assessment. All these scores, housing more than 380 unique, personalized data attributes, coalesce to form a multi-faceted approach to risk assessment.


In this final installment, we place the spotlight on a revolutionary addition to our suite – the Underbanked Inclusion Score. It is a never-before-seen risk score in the market, built to bolster financial inclusivity and empower the underbanked.

Global Scale of the Underbanked Challenge


The underbanked population, those who are inadequately served by traditional financial institutions, counts approximately 1.7 billion globally, as stated in a World Bank report. This enormous segment, often hindered by the rigid prerequisites of traditional banking, suffers from a chronic lack of access to financial products, aggravating the cycle of poverty.


One glaring instance is the 2016 Wells Fargo scandal. The bank, which opened millions of fraudulent savings and checking accounts on behalf of its clients without their consent, was accused of unscrupulous business practices.


Wells Fargo’s aggressive sales targets were one of the main reasons for the scandal, but also it underlines the persistent problem: a significant number of legitimate potential customers are still left underserved or unbanked. Such instances underline the necessity for reliable and inclusive credit risk assessment solutions like the Underbanked Inclusion Score.

The Power of Alternative Data in Driving Financial Inclusion


Our solution, the Underbanked Inclusion Score, harnesses data science and machine learning to analyze alternative data — data sourced from non-traditional financial behavior like utility bill payments, mobile phone data, and social media activity. This granular, alternative data-driven approach paves the way to a comprehensive financial profile for each underbanked individual, offering a clearer understanding of their creditworthiness.


In Brazil, for instance, the default rate in the microcredit sector is around 3.5%. However, fintechs employing alternative credit scoring methods have managed to achieve default rates as low as 2%. This demonstrates the potential benefits of such an inclusive credit scoring system.


Dynamic, Real-time Creditworthiness Assessment


The score ranges from 0 to 1, with higher scores signaling a lower risk profile and increased creditworthiness. Crucially, this score is dynamic; it updates in real-time, mirroring any changes in an individual’s financial behavior. It facilitates the most current credit risk assessment, helping to curtail the risk of loan defaults, a crucial advantage in sectors like microfinance where high default rates have often led to companies’ downfall.


Bridging the Financial Inclusion Gap: A Win-Win for all Stakeholders


The incorporation of our Underbanked Inclusion Score has multifaceted benefits. For financial institutions, it uncovers an untapped market, enlarging their customer base and catalyzing growth. For the underbanked, it unlocks access to vital financial products, helping secure a better financial future.


In 2018, U.S. banks reportedly made $11 billion in overdraft and non-sufficient funds fees, largely from financially vulnerable customers. Had those banks employed a more inclusive credit scoring system like the Underbanked Inclusion Score, the burden on customers could have been significantly reduced, while banks might have uncovered more financially sound ways to grow their revenue.

Conclusion: Fostering a More Inclusive Financial Future


Our Underbanked Inclusion Score exemplifies how 1DataPipe leverages data science and Provenir’s AI/ML technology to restructure the financial landscape. As we wrap up this series, we invite you to explore the potential of our Living Identity Scores, ID & Fraud Risk Score, Credit & Behavior Risk Score, and Underbanked Inclusion Score. Each is designed to revolutionize the financial sector and usher in a more inclusive financial era.


If you’re interested in leveraging the power of our scores, and enhancing your institution’s financial inclusivity, fraud detection, and credit risk assessment capabilities, we invite you to reach out to us. Connect with 1DataPipe today and together, let’s drive a financial future where everyone is included, and every opportunity is identified and harnessed.