TransUnion And FICO Partner To Introduce Groundbreaking Risk Solutions To Kenya To Expand Credit Access
- Kenya Transunion Kenya is leveraging its credit variable solutions and FICO partnerships to redefine risk management and help expand access to financial services across Kenya.
- By integrating rich data and advanced analytics, Kenya and FICO empower lenders to serve previously underserved individuals and SMMEs to build financial inclusion and economic growth.
Transunion Kenya, a global information and insights company, and FICO, head of global analytics software, lead the transformation of the country’s financial environment with new groundbreaking risk solutions aimed at expanding credit and empowering financial institutions. By leveraging rich data and analytics, lenders can now make smarter decisions that promote greater economic empowerment and build a more resilient financial ecosystem.
Two new solutions to this conversion core are Transunion’s CreditVision® Variable Solution and FICO® Score. Together, they address key challenges in risk assessment and financial inclusion. Creditvision variables provide an enhanced view of consumer financial behavior, analyzing more than 145 data sources and historical payment data for up to 24 months. The new FICO score was built for the Kenyan market using proprietary predictive analytics technology and has created more than 4 million records from the Transunion database.
Enhanced traditional credit risk strategies with FICO scores and comprehensive data analytics can improve risk predictability and enable lenders to expand financial services to more consumers. In other global markets, lenders who integrate credit variables into their credit risk strategies have greatly improved risk predictability by 20%-30%. This enhancement has resulted in a significant increase in approval rates ranging from 15% to 20%.
Credit video variables can meet basic business needs in the following ways
- Cost-effectively identify and attract the right new customers
- Grow and optimize the profitability of existing customers
- Provide insights into customer motivations and behaviors
“The impact of these innovations is expected to be profound. Consumers, small, micro and medium-sized enterprises (SMMEs) and others can benefit from greater access to credit and financial services, allowing them to improve their financial position and achieve their goals. Lenders will have access to better risk management and decision-making tools that lead to greater financial inclusion and empowerment and drive more sustainable overall economic growth and stability.”
Since 1997, Transunion has partnered with FICO, a pioneer in global analytics software in Africa, and the two companies have now extended their partnership to Kenya to introduce FICO’s advanced scoring model designed to meet the needs of the local market. The collaboration aims to improve the credit granting process by providing lenders with these advanced tools to manage portfolio risks and monitor credit activity.
The FICO score is the latest credit score evolution in the Kenyan market, aiming to reflect the rapidly growing lending ecosystem, especially the microcurrencies are more embedded than before. This single credit risk score provides lenders with a more granular and effective credit risk assessment means, thus giving borrowers a more accurate understanding of borrowers and providing significant predictive power for all forms of loans. Among all forms of loans, the predictive power of the FICO score of New Kenya-specific is significant, while specific industries such as micro loans perform particularly well. This is important in the Kenyan context, as 95% of evaluable consumers have at least one micro loan transaction.
The benefits of using FICO scores include:
- Single credit score to help lenders make credit decisions in traditional credit products and micro loans, including mobile loans
- Quick approval/descending decision for new applicants, reducing friction during the acquisition phase
- Refined allocation of credit lines and loan amounts
- Consistent risk-based pricing and business terms
- Improve risk management so lenders are confident that they can get more credit while controlling losses
- Improve efficiency with single scores in traditional and digital lending channels
FICO scores are digital snapshots of consumer credit risk, providing a measure of the possibility of fulfilling credit obligations. Using TransUnion’s data, the model produces scores ranging from 300 to 850, with higher scores indicating lower credit risk. Each credit score falls into four reasons for its calculations, providing transparency and actionable insights into the factors that affect the score. The score is calculated based on the creditor’s requirements and uses the latest information in the Transunion file.
“This transparency helps loan officials and consumers,” said Mike Manaton, vice president of FICO scores. “FICO scores provide clear insights into factors that affect consumer scores. In addition, it enables lenders to evaluate applicants more accurately, tailoring credit terms accordingly and providing credit access to more consumers.”
An example of the functionality of FICO scores is the account distribution over the entire score range. As shown below, as the score increases, the risk drops sharply, and consumers score in the highest risk decile (300-442), which is nine times the risk of consumers score in the lowest risk decile (682-850).
according to Transunion’s Q2 2024 Consumer Pulse ResearchKenya’s financial inclusion continues to improve. Its insights show that 36% of consumers believe they have sufficient credit access, compared with 33% a year ago. It is worth noting that the increase in financial inclusion is noteworthy, as more than half (60%) of consumers say they are considering applying for new or refinancing existing credit in the next 12 months.
“We welcome this global innovation in Kenya and are confident that the industry will adopt these solutions to drive the country’s financial inclusion agenda. Financial inclusion remains a focus of the industry as it is crucial to foster economic growth and empower communities. By adopting these new technologies, we can ensure wider access to financial services, thus supporting sustainable development and prosperity for all.” John Gasola, Chairman of the Kenyan Bankers Association (KBA), John Gasola, President of the Kenyan Bankers Association (KBA),
