Banking the Unbanked: Using Grocery Data for Credit Decisions

53 Pages Posted: 8 Jul 2021 Last revised: 3 Aug 2022

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: August 2, 2022

Abstract

Many consumers across the world do not have access to credit and one of the key reasons is that lenders do not have sufficient data to assess the creditworthiness of those consumers. This paper evaluates the potential of a new type of alternative data source to predict consumers' creditworthiness: grocery transaction data. Our analysis takes advantage of a unique, individual-level match of credit card data and supermarket loyalty card data, which allows us to build a credit scoring algorithm that incorporates grocery data. We find that grocery data can improve out- of-sample predictive accuracy of missing a credit card payment by up to 12.5%. We also find that consumers who do not have credit scores or are lower-income are more likely to benefit from the use of grocery data. Overall, our findings suggest that grocery data may serve as a channel through which traditionally under-served consumers in credit markets can signal their creditworthiness to lenders.

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, Banking the Unbanked: Using Grocery Data for Credit Decisions (August 2, 2022). 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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