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

85 Pages Posted: 14 Jan 2020 Last revised: 16 Apr 2021

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Shashwat Alok

Indian School of Business (ISB), Hyderabad

Pulak Ghosh

Indian Institute of Management (IIMB), Bangalore

Sudip Gupta

Johns Hopkins University

Date Written: December 21, 2019

Abstract

We use unique and proprietary data from a large Fintech lender to analyze whether
alternative data captured from an individual's mobile phone (mobile/social footprint) can
substitute for traditional credit bureau scores and improve financial inclusion. Variables
that measure a borrowers' digital presence, such as the number and types of apps installed,
measures of social connections and borrowers' "deep social footprints" based on call logs,
significantly improve default prediction and outperform the credit bureau score. Using machine
learning-based prediction counterfactual analysis, we fi nd that alternate credit scoring
based on the mobile and social footprints can expand credit access for individuals who lack
credit scores without adversely impacting the default outcomes. The marginal
benefit of using alternative data for credit decisions are likely to be higher for borrowers with
low levels of income and education, as well as borrowers residing in regions with low levels
of financial inclusion.

Keywords: Fintech, Big data, Credit scores, Financial inclusion, Lending, Machine Learning, Mobile footprint, Prediction Counterfactual, Social footprint, Social capital

JEL Classification: G20, G21, G29

Suggested Citation

Agarwal, Sumit and Alok, Shashwat and Ghosh, Pulak and Gupta, Sudip, Financial Inclusion and Alternate Credit Scoring: Role of Big Data and Machine Learning in Fintech (December 21, 2019). Indian School of Business, Available at SSRN: https://ssrn.com/abstract=3507827 or http://dx.doi.org/10.2139/ssrn.3507827

Sumit Agarwal

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Shashwat Alok

Indian School of Business (ISB), Hyderabad ( email )

Hyderabad, Gachibowli 500 019
India
914023187188 (Phone)

Pulak Ghosh

Indian Institute of Management (IIMB), Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India

Sudip Gupta (Contact Author)

Johns Hopkins University ( email )

Baltimore, MD 20036-1984
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
916
Abstract Views
2,908
rank
32,232
PlumX Metrics