Liz Pagel is Senior VP, Global Head of Alternative Credit Data Solutions, at TransUnion, a global information and insights company.
Financial inclusion is a no-brainer. Done right, good work in this space can unlock economic growth and help consumers build wealth. That’s part of why the idea has strong support from well-placed policymakers in the United States, including the current chair of the Senate Banking Committee.
But it begs the question: If the goals are clear and the concept has broad support, why is it so hard to move the ball forward?
This keeps me up at night but is also the reason I love my job. As the global head of alternative credit data solutions at my company, I’m responsible for helping our industry adopt a more comprehensive approach to consumer data. We’ve accomplished a lot in the past few years, but to get to the next level, it’s time to reframe financial inclusion and reorient the work to meet an evolving landscape. Here’s how.
Highlight All Beneficiaries Of Financial Inclusion
Earlier this month, I joined the Aspen Institute’s Leadership Forum on Inclusive Finance. The conversation centered on what the modern consumer finance system will look like in the next five, 10, 20 years and how we can ensure more people have access to the mainstream financial products and services that make our economy work.
It was a great discussion with incredibly experienced and committed leaders. We talked about opportunities and barriers across credit access, wealth building and freedom from fraud and scams. I focused on access to credit given my role at TransUnion. I came away looking at this problem through two distinct lenses: helping consumers but also helping businesses.
First, innovation has given lenders access to exciting new datasets and modeling methodologies, meaning that broader access to credit can be a win-win—for lenders and for consumers. The growing availability of new data means that lenders have more information to effectively price risk for consumers with limited or damaged credit histories, making many of them eligible for credit. More eligible customers push up the demand curve (classic microeconomics) and help businesses grow more profitably, not to mention the benefit to the consumers themselves.
I walked away excited about demand deposit data (including cash flow data), buy now, pay later tradelines, AI and machine learning to improve models, as well as the potential for blockchain assets and transactions to help underwrite more consumers in the future. We even talked about the potential for AI assistants to help consumers manage tight cash flows, build credit or invest for the future.
That said, there are limitations today that the financial services industry needs to work together to overcome. Today, cash flow data is generally accessed transactionally, one time at the time of underwriting. That limits lenders’ ability to create models using historical datasets, and it limits the investors who ultimately buy the securitized assets from seeing this dynamic new picture of the borrower.
Emphasize The Business Case For Financial Inclusion
We can super-charge the financial inclusion effort if stakeholders make the value proposition clear, talking about it in real-world terms to clarify the benefit for the U.S. economy. Providing services to rural Americans in underbanked areas, protecting older Americans against a booming fraud and scam business, or helping young people get started in their financial journey are great motivations alone.
We have an opportunity to communicate that financial inclusion isn’t about handouts or charity. This is fundamentally a merit-based system that rewards sound financial practice, with tremendous upside for consumers, businesses and the economy. There’s no need to shy away from the business benefit. If we’re successful, financial inclusion will result in more customers for the businesses that today are forced to turn away good consumers who want their products.
As the landscape evolves, it’s incumbent on all of us to speak persuasively across all audiences, embrace new innovations and think our solutions all the way to the end for maximum benefit. Financial inclusion needs a new frame to meet the challenge, but there’s a long and hopeful runway ahead.
I challenge all of us to write the business case for financial inclusion. For me, it’s as simple as this: If you could unlock millions of new paying customers, would you invest? The answer is a no-brainer.
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