Financial Inclusion and Alternate Credit Scoring for the Millennials: Role of Big Data and Machine Learning in Fintech

A recent survey in the US showed that almost half of the millennials in the US feel that their credit score is holding them back1.Younger people su§er from shorter credit history and hence are often denied credit by traditional financial institutions or are charged prohibitively high interest rates, which limits their access to credit2. This, in turn, exacerbates the evaluation of their creditworthiness by limiting their ability to build a good credit history. Many such individuals may actually be ‘good borrowers’ if their ‘creditworthiness’ could be evaluated using alternate data. The problem of lack of credit history for the millennials is a world-wide phenomenon and especially true for developing countries. For example, according to a recent industry report, 156 million Indians who comprise the ‘urban mass’ representing an annual income of USD 3000 and above have the potential of mass adoption of consumer credit. Of this ‘urban mass’, approximately 129 million have been mostly deprived of credit due to a lack of credit history