[Editor’s note: This is a guest post from David Lin, Head of Credit at PayU. David is an experienced FinTech risk executive with a background in consumer and small business lending across international and US markets. At PayU, David works with the team to successfully launch lending products by leveraging technology and data science to manage risk while balancing customer experience and optimizing operational effectiveness. He specializes in assessing, quantifying, and mitigating risks by incorporating performance monitoring and benchmarks regarding growth, delinquency, losses, recovery and overall profitability.]
For millions of people, a lack of access to credit is just another part of life. Yet, without this access, it can be incredibly difficult for businesses and customers to connect with each other. In fact, according to The World Bank, despite a 20% increase between 2011 and 2014 in the number of adults with access to formal financial services worldwide, an expected 2 billion adults worldwide are unbanked. In addition, some 200 million businesses are excluded from the formal financial system.
The fact that traditional credit bureaus serve only a slice of the world’s adult population is not new. However, access to credit doesn’t just equate to financial inclusion; millions of people have money in their bank accounts but aren’t given access to credit for spontaneous purchases because they don’t fit the usual profiles. With traditional credit models simply not catering to large sections of the population, it is more important than ever to find ways to offer innovative solutions to this problem.
The problem is particularly prolific in high growth markets; with a 2015 PwC report putting India’s unbanked population at 233 million (that’s nearly every 1 in 6 people). In South East Asia, a further 264 million people are without access to credit (including a staggering 80% of Cambodians). And even beyond the individuals affected, some 200 million businesses are excluded from the formal financial system.
Fortunately, the advancements we’re seeing in fintech innovation, particularly in emerging markets like India and LatAm, means we are starting to see positive change, with credit’s net widening at an increasingly rapid pace. This has been aided by increasing customer demand, tech innovation and a supportive regulatory environment.
Thanks to our deep and evolving understanding of local nuances and payments preferences, we have been able to witness the importance of access to credit and just how many people currently don’t have access through traditional means. The industry has a huge tool at its disposal though: technology. And we should all be using it to challenge the ‘norm’, deploying state-of-the-art solutions to develop new and innovative models that can provide broader access to credit.