Sunday, March 3, 2024

BSP pushes use of alternative data, including from social media, for credit scoring

The Bangko Sentral ng Pilipinas (BSP) is urging the industry to explore the use of alternative or non-traditional consumer data such as those coming from social media to improve, and deliver financial services.

“With alternative data, a more complete picture of the client is painted thus allowing for more individuals and businesses to be assessed,” BSP governor Benjamin E. Diokno said during a recent webinar by the FinTech Alliance Philippines and TransUnion themed, “Data-Driven Road to Financial Inclusion.”

Unlike traditional data which is composed of bank transactional data and credit bureau information, alternative data come in several forms, including social media, mobile data, utilities data, behavioral data, online transactions, geolocation data, and browser data, among others.

Forecasting creditworthiness is one promising use case of alternative data, especially since many Filipino adults and MSMEs still do not have or have little credit history, the central bank said.

In a September 2021 rapid survey by the BSP, respondents cited better customer profiling, improved pricing of loan products, and lower default rates as the realized benefits of using alternative data. While it took an average of two years before the benefits are realized, the potential is significant, said Diokno.

“The use of alternative data for credit scoring is just one example of how data can be used to benefit consumers. Looking ahead, we must continue to take initiative in fostering an inclusive digital financial ecosystem,” Diokno said.

Meanwhile, the BSP reminded supervised financial institutions to enhance their surveillance and monitoring measures to deter digital vote-buying and selling schemes in relation to the upcoming elections in May 2022.

The BSP issued Memorandum M-2021-074 to mitigate heightened risks of the possible use of electronic channels like online banking and mobile wallets in vote buying or selling activities.

The central bank also specified possible scenarios such as the concentration or significant number of transaction account registrations in an area where vote buying or selling has been identified as rampant.

The BSP also alerted banks to be vigilant of large cash transactions during the election period. It also warned against unusual transaction flows between accounts and unusual volume and/or value in cash in or cash out channels.

Likewise, the central bank advised BSP-supervised financial institutions (BSFIs) to adjust their fraud management systems (FMS) and transaction monitoring parameters to foil the possible misuse of online financial channels.

BSFIs were also told to implement necessary enhancements and remedial measures to ensure that appropriate customer onboarding processes and effective FMS are in place.

The BSP said it is closely coordinating with the Commission on Elections and the Philippine National Police to reduce, if not curb, election vote buying or selling using digital financial platforms.

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