Using Grocery Data for Credit Decisions

64 Pages Posted: 8 Jul 2021 Last revised: 12 Mar 2024

See all articles by Jung Youn Lee

Jung Youn Lee

Rice University - Jesse H. Jones Graduate School of Business

Joonhyuk Yang

University of Notre Dame - Mendoza College of Business

Eric Anderson

Northwestern University - Department of Marketing

Date Written: March 10, 2024

Abstract

Many consumers across the world struggle to gain access to credit due to the lack of credit scores. This paper explores the potential of a new type of alternative data source, namely grocery transaction data, to assess consumers’ creditworthiness. Our analysis takes advantage of a unique, individual-level match of credit card data and supermarket loyalty card data, which enables us to build a credit scoring algorithm that incorporates grocery data. We show that incorporating signals derived from grocery data improves the accuracy of credit risk prediction, above and beyond traditional data sources such as income and credit scores. Through simulations of different credit extension decision rules, we illustrate that the distributional impact of using grocery data relies heavily on how lenders utilize the predictions, with contrasting effects on the likelihood of credit approval for lower-income consumers. Together, our findings highlight that grocery data can serve as a channel through which traditionally underserved consumer groups in credit markets can signal their creditworthiness to lenders, provided that lenders harness the data appropriately.

Keywords: Grocery data, Alternative data, Financial inclusion, Consumer finance, Credit cards market, Habits, Economics of data

JEL Classification: D12, D18, G40, G51

Suggested Citation

Lee, Jung Youn and Yang, Joonhyuk and Anderson, Eric, Using Grocery Data for Credit Decisions (March 10, 2024). Wharton Customer Analytics Research Paper, Available at SSRN: https://ssrn.com/abstract=3868547 or http://dx.doi.org/10.2139/ssrn.3868547

Jung Youn Lee (Contact Author)

Rice University - Jesse H. Jones Graduate School of Business ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States

Joonhyuk Yang

University of Notre Dame - Mendoza College of Business ( email )

Notre Dame, IN 46556-5646
United States

Eric Anderson

Northwestern University - Department of Marketing ( email )

Kellogg School of Management
2001 Sheridan Rd.
Evanston, IL 60208
United States

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