Currently, there are two billion people worldwide who cannot access financial services because their data is not held on ‘traditional’ sources.
There is a clear disparity between these ‘unbanked’ populations and those whose data is available through alternative sources.
The use of alternative data has the potential to put previously ‘invisible’ individuals on the map, unlocking opportunities for financial inclusion and economic growth.
What is alternative data?
Traditionally, when performing some form of identity verification or onboarding, businesses would use methods such as proof of address or sending a copy of a passport and manual checks. These outdated processes can be time-consuming, frustrating and create a poor user experience for customers who may be likely to move to a competitor. Relying on traditional data to verify identity doesn’t just alienate the modern digital consumer, it can also lead to huge demographics being unable to access the services they want.
This is where alternative data can be used to draw insights on a consumer’s financial profile. Alternative data is the antithesis of traditional data in that it includes anything from mobile phone usage, monthly payments and social media activity, to biometric identities derived from iris scans, fingerprints and hand geometry.
Alternative data offers the opportunity to collate, assess and corroborate the digital footprint of a potential customer in real time, creating a 360° view. This reduces drop-off rates in the onboarding processes and flags fraudulent activity, while offering a truly global solution. Leveraging a multi-pronged approach to analyse digital data in real-time can verify identity robustly, quickly and efficiently all online with less friction than traditional methods; according to Experian, 75% of businesses want advanced authentication and security measures that have little or no impact on the digital customer experience.
How can we use it?
Where these ‘thin-filed’ customers usually have some form of identification, they often lack the documentation and credit records required by providers to assess creditworthiness and perform consumer due diligence.
Comparatively, there are nearly 4 billion active social media users worldwide (more than half of the global population) who have a digital footprint. Alternative sources such as these are less susceptible to fraud; social profiles for example are often built up over a number of years and are verified by their connections. They are also less costly to maintain than traditional paper-based documents, which are more likely to be lost or damaged and require storing, continuous updating and are difficult to quickly navigate. Importantly, these alternatives enable remote account opening, lowering the operational costs for banks aiming to serve often isolated consumers. Utilising alternative data sources throughout the verification process can help to reduce drop-offs and allow good customers through who may previously have been rejected.
By leveraging alternative data sources such as these, businesses can construct a richer, contextual understanding of individual consumers, enabling both more accurate risk assessment and personalised customer experiences.
In our latest infographic, we break down a number of different alternative data sources and how they stack up against each other in enabling inclusion:
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<p><a title="Comparing Data Sources - Hello Soda" href="https://hellosoda.com/blog/comparing-alternative-data-sources/"><img style="max-width: 850px;" src="https://hellosoda.com/wp-content/uploads/2021/02/How_Do_Alternative_Data_Sources_Compare.png" alt="Comparing Data Sources - Hello Soda" width="100%"></a></p>
How we can help
Here at Hello Soda, our automated solutions support businesses in creating a smoother, safer onboarding experience for their customers. Our product suite and single, universal API, can help you securely verify up to 68% more customers than with traditional, manual identity verification methods.
Hello Soda’s one simple, global solution, Sodium enables customer verification in real-time. Utilise a single element or multiple processes – it’s entirely up to you. Learn more about how we can help to automate and simplify your verification processes to help you gain a better understanding of your customers.
Click here to book a demo today and see for yourself how powerful our suite of solutions are.