Forty percent of FIs Report Rising
Delinquencies Amid Growing Economic Pressure
ATLANTA, Oct. 30,
2024 /PRNewswire/ -- LexisNexis® Risk Solutions
unveiled the findings of its inaugural Global Consumer Lending
Confidence Report. The study, conducted by Datos Insights,
reveals that as visibility into consumer risk provided by
traditional credit data shifts, financial institutions worldwide
are expanding their use of alternative data throughout the consumer
lending journey.
Global financial institutions and consumers are navigating
economic and regulatory changes. Lenders are seeking more effective
ways to predict risk by increasingly turning to alternative credit
data to supplement the traditional credit data used by lenders for
decades to assess consumer credit risk. According to 97% of global
respondents, lenders identify collecting delinquent loans as their
primary challenge. The report shows that 40% of respondents have
observed an increase in delinquencies over the past 12 months.
Compared to 2023, lenders are less confident in making consumer
lending decisions based solely on traditional credit data.
Seventy-eight percent (78%) of global respondents cite challenges
with limited visibility into consumers' negative payment history.
To address gaps in traditional credit data and improve
decision-making processes, 66% of respondents are considering
expanding the use of alternative credit data to enhance credit risk
assessments and make more reliable lending decisions.
"Financial institutions attempting to assess creditworthiness
with traditional credit data alone are competing with one hand tied
behind their back. Lenders must embrace alternative methods," said
Kevin King, vice president,
credit risk at LexisNexis Risk Solutions. "By leveraging
comprehensive data insights, financial institutions enhance their
risk assessment capabilities, optimize loan portfolio performance
and achieve superior financial outcomes."
The study involved 434 financial institution employees across
nine countries, including the United
States, Colombia,
Mexico, South Africa, India, Italy,
the Philippines, Spain and the United
Kingdom.
Key Findings on Consumer Lending Confidence:
- Top Challenges for Lenders: Ninety-one percent
(91%) of global respondents expect delinquencies and defaults to
remain the same or increase over the next 12 months. Organizations
also encounter challenges in attracting new qualified borrowers,
retaining existing customers and accessing and using external
data.
- Waning Confidence in Traditional Credit Data: Compared
to a year ago, 59% of global lenders are less confident in their
ability to compete in making consumer lending decisions with
traditional credit data alone, noting gaps in traditional data's
ability to assess credit risk. As regulations change, the use of
non-reported financial products increases and credit reporting
practices shift, the predictive performance of traditional credit
data may be waning.
- Adoption of Alternative Credit Data: 86% of global
lenders are more confident when making consumer lending decisions
using alternative credit data compared to a year ago. This
confidence stems from alternative credit data closing visibility
gaps in understanding consumer credit health. Lenders currently use
alternative credit data for pre-screen marketing, loan origination,
portfolio management and collections.
Download the 2024 Global Consumer Lending Confidence Report.
Methodology
The study surveyed 434 individuals
globally from financial institutions responsible for lending or
risk operations, all possessing significant knowledge of these
functions at banks, credit unions, and non-bank lending
institutions of varying asset sizes, to explore industry
challenges. The survey evaluated their confidence in traditional
credit data and the use of alternative credit data and scores in
consumer lending. Alternative credit data includes decision-making
information that integrates life event insights such as
professional licenses, asset ownership, and public records, along
with modern credit-seeking behaviors from sectors like online and
short-term lending.
About LexisNexis Risk Solutions
LexisNexis® Risk
Solutions harnesses the power of data, sophisticated analytics
platforms and technology solutions to provide insights that help
businesses across multiple industries and governmental entities
reduce risk and improve decisions to benefit people around the
globe. Headquartered in metro Atlanta, Georgia, we have offices throughout the world
and are part of RELX (LSE: REL/NYSE: RELX), a global provider of
information-based analytics and decision tools for professional and
business customers. For more information, please
visit LexisNexis Risk
Solutions and RELX.
Media Contact:
Ade O'Connor
+44 7890 918 264
ade.o'connor@lexisnexisrisk.com
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