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How big data really fits into lending

Summary:
If banks exclude certain kinds of borrowers, this creates an opportunity for alternative lenders. This is the idea behind a host of new platforms that have emerged since the crisis.In some cases, safe borrowers might be unable to get through the bureaucratic processes at large banks, giving rise to a kind of data arbitrage on behalf of the smaller lender. Internationally determined risk-weights or distant headquarters might override the realities of local markets for credit.New lending platforms, especially of the fintech variety, also claim to have more efficient or innovative data analytic processes in place, allowing them to more accurately price credit. Here’s Moody’s, today, on the topic of new underwriting technologies in general: In recent years, rapid advances in new technologies

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If banks exclude certain kinds of borrowers, this creates an opportunity for alternative...

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FT Alphaville is a free daily news and commentary service giving finance professionals the information they need, when they need it. In a world where market professionals are inundated with information there is a pressing need to edit and filter, and hopefully sow a few ideas along the way. That’s where the FT Alphaville team comes in.

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