In the Spotlight with Nina Kerkez, LexisNexis Risk Solutions

We spoke to Nina Kerkez, director of UK&I consulting at LexisNexis Risk Solutions, about financial inclusion and how alternative data can help give more people access to financial services

Related topics:  In The Spotlight
Rozi Jones
2nd July 2021
Nina Kerkez
"Access to financial services grants financial independence which can improve a person’s ability to find and keep jobs, manage welfare payments, and reduce the risk of financial hardship."

FR: Can you start by telling us a bit more about financial inclusion?

Financial inclusion is exactly what it says on the tin. Its objective is to ensure all individuals and businesses have access to financial products or services that are both affordable and useful.

FR: People often undermine the importance of access to financial services - can you briefly explain the advantages of access to financial services?

The advantages cannot easily be overstated. Those with access to financial services can, for example, apply for credit and savings products, take out insurance policies, own their own home, and improve their access to healthcare and education.

Financial inclusion not only helps the individuals in question, but also benefits wider society. Access to financial services grants financial independence which can improve a person’s ability to find and keep jobs, manage welfare payments, and reduce the risk of financial hardship. Having these benefits, which many people take for granted, creates greater opportunities for individuals, their families, and their communities, contributing to stronger economic growth, both now and in the future.

For this reason, the U.N. High-Level Panel recognised financial inclusion as a key development priority in 2015. The World Bank echoed this sentiment by identifying financial inclusion as a key enabler for seven of the 17 sustainable development goals put in place to address worldwide economic inequalities.

FR: The global financial inclusion picture has improved drastically over the past 10 years with an additional 1.2 billion citizens globally gaining access to basic financial services. What inequalities persist? Which groups are still affected?

It’s true to say that global initiatives have enabled greater financial inclusion in recent years, but inequality still exists. For example, 72% of men currently have access to bank accounts, compared to just 65% of women – and whilst overall inclusion has improved, the gap between male and female financial inclusion remains unchanged over the past 10 years. Those from poorer households, rural areas and ethnic minorities are also disproportionately underserved.

It’s often assumed that people find themselves financially excluded due to a poor credit history, but it can also be due to having a ‘thin credit file’, which happens when financial services companies simply lack the information they need to perform adequate credit checks on a person. Individuals can often fall into these categories without realising it, either as a result of using alternative credit products such as payday loans or peer to peer finance for an extended period of time, or simply by remaining below a certain income threshold, or not holding an active bank account.

FR: Tell us more about alternative data and how can it help give more people access to financial services.

Alternative data is extremely helpful in assisting the financially excluded. Financial services companies can access this type of data, collected from sources like occupational licenses, public records, business associations, academic achievement, identity records or even a routinely paid online subscriptions. In many cases, this information can help businesses risk assess a person’s credit worthiness far more accurately than relying solely on traditional sources of data.

In fact, recent research from LexisNexis Risk Solutions found that 31% of renters and 16% of homeowners who were previously declined access to credit were approved when alternative data was used . As a result, using alternative data for risk score modelling has the potential to help individuals access a wide range of products and services from which they’ve been excluded in the past, including car rental, broadband, streaming services and more. Alternative data could even help level the playing field in areas like utilities, where those on lower incomes or with thin credit files are forced to pay higher energy tariffs due to their perceived credit risk (known as the ‘poverty premium’). Being able to better risk assess these individuals will enable suppliers to offer them the fairest and most appropriate available tariffs.

FR: Data seems like a key tool to improve financial services in our society. Can you tell us some of the other ways LexisNexis Risk Solutions use data for good?

Data is our key defence against fraudsters and financial crime. In our increasingly digital society, it’s data that allows remote transactions to take place seamlessly, without compromising on effective ID verification and Know Your Customer (KYC) processes. As a result, this type of data can help to protect a person from fraud, including identity theft and Card Not Present fraud.

Behavioural biometrics is another example of how data can be used for good. Using this technology, we can now look at the way a mouse is moved, or how someone interacts with their keyboard. We can even analyse how fast they type or how hard they push the keys. By collecting this kind of data, we can create a baseline for a comparison point, so that red flags are raised and risky transactions can be cancelled if there are inconsistencies in a user’s behaviour. With this approach, companies can eliminate fraud before it takes place and protect consumers from harm.

As well as defending against attackers, data can also be used positively to help businesses better understand their customers and in doing so, enable businesses to serve them better through enhanced customer experience, better and more appropriate products and services and faster, more secure access to online services.

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