Big Data and Lending: What’s the Connection?

<br /> <div class="separator" style="clear: both; text-align: center;"> <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhozDqc9pQ_58-1klOFNXA-wHluJZCvA6nJxJYKkobVs7WyIZijL_HDoxDPunsINuGcvElCJWxwFaiQnHrm1G27cfjnV-PSHmvDp9CbImamKm8rpJ1AyjdmwR0gV0ABmYLgqgtBQazbbLU/s1600/Big+Data+and+Lending+What%E2%80%99s+the+Connection.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="169" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhozDqc9pQ_58-1klOFNXA-wHluJZCvA6nJxJYKkobVs7WyIZijL_HDoxDPunsINuGcvElCJWxwFaiQnHrm1G27cfjnV-PSHmvDp9CbImamKm8rpJ1AyjdmwR0gV0ABmYLgqgtBQazbbLU/s1600/Big+Data+and+Lending+What%E2%80%99s+the+Connection.jpg" width="320" /></a></div> <div class="MsoNormal" style="line-height: 150%; margin: 0in 0in 10pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;"> <span style="font-family: Calibri;">Yes, credit scores are still important for borrowing but there is more to data being used in the lending marketplace. Lately, there has been an outburst of digital information. A large portion of it can be saved, retrieved, collected, and analyzed for discovering consumer behaviors. This is the reason behind the resurgent optimism in small lending, especially for smaller businesses.</span></div> <div class="MsoNormal" style="line-height: 150%; margin: 0in 0in 10pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;"> <b style="mso-bidi-font-weight: normal;"><span style="font-family: Calibri;">Big Data Helps Discover Credit-worthy Businesses/Populations</span></b></div> <div class="MsoNormal" style="line-height: 150%; margin: 0in 0in 10pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;"> <span style="font-family: Calibri;">Every bit of data, from social media updates to the options made across online discount channels, is saved somewhere. Finding such data storage resources isn’t difficult. Similarly, there is more to credit history now with credit card transactions being executed online, complete with email confirmations delivered straight to the inbox. Digital cash flow can tell much more than just credit score. It can be tracked over a period to assess whether a previously defaulted lender is now capable to pay for small loans. This might be understood as the predictive nature of big data analysis but it can be very accurate. Just like Google algorithms, data analysis uses small sets of information. Search results of data analysis help to calculate the credit worthiness of a potential borrower.</span></div> <div class="MsoNormal" style="line-height: 150%; margin: 0in 0in 10pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;"> <b style="mso-bidi-font-weight: normal;"><span style="font-family: Calibri;">Big Data Stimulates Lending</span></b></div> <div class="MsoNormal" style="line-height: 150%; margin: 0in 0in 10pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;"> <span style="font-family: Calibri;">Small businesses have traditionally struggled to borrow regularly from banks, particularly short term loans. As banks became more reserved about small business lending after 2008, non-banking lending came to the rescue. Today, business loans are being provided by lending institutions that are ready to lend in a more data driven way. For instance, a small business selling cosmetics is most likely to have a social media presence. This means interacting with consumers frequently. This is like a digital footprint that lenders using big data can find. Online consumer reviews or public records that highlight a small business are no longer out of reach. This data is used to assess risk when issuing a small business loan.</span></div> <div class="MsoNormal" style="line-height: 150%; margin: 0in 0in 10pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;"> <b style="mso-bidi-font-weight: normal;"><span style="font-family: Calibri;">Dynamics of Small Business Lending</span></b></div> <div class="MsoNormal" style="line-height: 150%; margin: 0in 0in 10pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;"> <span style="font-family: Calibri;">There can be some individual parameters that cannot be weaved into the intricate data structuring associated with big data. Such data might remain outside the domain of big data but it can be considered after data analysis has helped to comprehensively understand the degree of risk involved. Businesses can have very different credit profiles and margins. This is often affected by local regulations, unique geographies, and political environment. Same parameters for cash flow cannot be used across different type of businesses. Some businesses have a limited business history while some boast of years of functioning with limited profits. Similarly, transactions can vary immensely depending upon the business model employed. Thus, different data inspired parameters need to be established across different lending landscapes.</span></div> <div class="MsoNormal" style="line-height: 150%; margin: 0in 0in 10pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;"> <b style="mso-bidi-font-weight: normal;"><span style="font-family: Calibri;">Why You Should Consider Big Data Professionals</span></b></div> <div class="MsoNormal" style="line-height: 150%; margin: 0in 0in 10pt; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;"> <span style="font-family: Calibri;">To collect such data from the web; save it, harvest it, and make it relevant for future decisions businesses need big data specialists. These are vendors who can stream through overwhelming volumes of data and translate it into easy to understand, usable form. Reports submitted from the analytical team inspire management decisions to approve/decline a loan. The entire process might take a week or a month, depending upon the big data capabilities of the lending authority.</span></div>

Big Data and Lending: What’s the Connection?

Yes, credit scores are still important for borrowing but there is more to data being used in the lending marketplace. Lately, there has ...

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