TransUnion to Maximize Financial Inclusion Opportunities
CHICAGO, Feb. 24 8, 2022 (GLOBE NEWSWIRE) — Up to 100 million American adults* have used Buy Now Pay Later (BNPL) loans at least once in the past 12 months, but financial institutions currently don’t have access to the valuable information generated when consumers open and redeem these new debt securities. To help promote financial inclusion opportunities for this growing population and enable the financial community to accurately capture the credit behaviors of consumers using these loans and other point-of-sale payout products, TransUnion (NYSE: TRU ) today presented its new point of sale. Sale suite of solutions.
Putting the loan on the consumer credit file at the point of sale is likely to benefit populations who most need new tools to build and improve their credit. About 9% of outlet applicants studied by TransUnion are restricted files (have three or fewer trades declared). Younger generations – Gen Z and young millennials – will benefit, as people using this credit product tend to be younger. One out of three point-of-sale financing applicants (33%) is between 18 and 30 years old, compared to 17% for the entire credit workforce. And 43% of point-of-sale applicants are in the subprime credit risk category, compared to 13% overall.**
“Including point-of-sale loans, including BNPL, in credit reports and other risk management tools can help tens of millions of consumers access more credit opportunities and potentially get better loan terms. TransUnion has taken a measured approach in developing our suite of solutions, working with top BNPL lenders over the past three years to design solutions that benefit consumers and do not penalize them for frequent use of these products.” , said Liz Pagel, senior vice president and consumer consulting. Head of Lending Operations at TransUnion. “TransUnion’s approach helps lenders and consumers ensure that credit activity is captured in a way that maximizes benefits for consumers and the broader credit ecosystem.
Point-of-sale loans are transactional, like a credit card swipe, but are taken out as individual unsecured installment loans. Therefore, a consumer with normal buying habits could take out several loans per year, which most existing credit models consider risky behavior. This could have an undue impact on the credit scores of millions of consumers, making ratings less predictive.
TransUnion launches the ability to receive point-of-sale lender transactions through the traditional credit reporting process, with Metro 2® reporting guidelines that ensure compliance with the FCRA. The goal is to have a single standard for lenders to report data on and to accelerate adoption by lenders and rating providers in the future. Information will be tagged and filtered in a new partitioned portion of TransUnion’s main credit file.
TransUnion credit data users will be able to choose to receive these commercial lines as part of their existing credit data delivery. Default credit report delivery, which feeds into existing scoring models, will not be affected. Over time, as the industry strives to improve models with this data, it is expected that many lenders will choose to use the information in addition to their existing models to help expand their boxes. of purchase, which accelerates the impact on consumers.
In the long term, TransUnion plans to include point-of-sale data in the master credit file to maximize the number of resulting credit decisions. “The industry needs time to adapt, and each lender will adopt the business lines and POS attributes at their own pace. Maximizing the impact of financial inclusion requires broad use of this valuable data in more credit decisions. Ultimately, given the importance of FICO and VantageScore in the market, the greatest impact of data will only be realized when data migrates to the main file and these scores take into account good consumer behavior. added Pagel.
The initial capacity will allow FICO and VantageScore, as well as major financial institutions, FinTechs and other lenders, enough time to ensure they build future versions of their underwriting models that give consumers credit. good performance in point-of-sale products.
“Buy Now Pay Later is helping many consumers access short-term credit to make purchases at a time of rapidly rising prices. BNPL can enable consumers who have traditionally had no credit history to build better credit scores. We believe adding this data to credit scores can contribute to broader financial inclusion and are working quickly to integrate it into VantageScore models,” said Silvio Tavares, President and CEO of VantageScore.
“FICO is committed to financial inclusion and expanding access to credit by leveraging more data, when available, and grounded in empirical analysis,” said Sally Taylor. , Vice President and General Manager of FICO Score. “These are top priorities at FICO and we look forward to working with TransUnion to determine the best approach for including BNPL data in the credit report considered by the FICO Score family of products.”
For more information on TransUnion’s suite of point-of-sale solutions, click here.
About TransUnion (NYSE: TRU)
TransUnion is a global information and knowledge company that enables confidence in the modern economy. We do this by providing an actionable picture of each person so they can be reliably represented in the marketplace. As a result, businesses and consumers can transact with confidence and achieve great things. We call this information for good®.
A leading presence in more than 30 countries on five continents, TransUnion provides solutions that help create economic opportunity, great experiences and personal empowerment for hundreds of millions of people.
*Based on 38% of 2,949 U.S. adults in the TransUnion Consumer Pulse study from Feb. 7-15, 2022 who reported using a BNPL loan in the past 12 months, and the 2020 U.S. Census Bureau count of 258.3 million adults living in the United States
** TransUnion Credit Database; Subprime = VantageScore 4.0 range from 300 to 600.