The Value of the Credit Bureau Industry in Emerging Markets
Being able to extend credit based on informed decisions can fuel economic growth, increase consumer access to essential resources and enable more efficient allocation of risk, costs and financial reserves. The reason for this is simple: where access to information is asymmetrical or unavailable, access to lending and credit resources becomes more difficult, expensive and inefficient.
In contrast, access to consumer credit information enables consumers and private companies to freely transact with each other as the more objective information the business has, the more accurately it can meet consumer needs and preferences.
Across Africa, we are seeing more and more countries drive the implementation of the necessary regulatory framework to ensure greater financial inclusion that is underpinned by fair and equal access to credit information by consumers and businesses.
The credit bureau industry exists to manage the credit information of both consumers and businesses and to provide a comprehensive view of the risk associated with a lending decision.
For consumers, access to their own credit profile creates the opportunity to monitor and manage their credit standing in a proactive and sustainable way. It’s important to remember that everyone needs to keep track of their own credit obligations and credit bureaus can help consumers to manage their own personal financial reputation and in turn the way lenders view their ability to pay back their loans.
The extension of credit is becoming more and more prevalent across Africa. As consumers seek to better their financial situation through access to additional funds, it is often that too much debt is taken up without the monetary means to meet the repayments. The habit of repaying debt obligations on time and as per the credit agreement is not as consistent as it should be. Credit, although extremely important and beneficial to personal development can sometimes pose a daunting risk. Knowing how to manage your financial situation is key to improving the way lenders view your credit standing and therefore the way in which they will extend credit to you: at what amount, term and interest rate.
For many consumers, being told they have a negative credit listing is unhelpful as they are unaware of exactly what the issue is. The non-payment of loans can adversely affect credit rating and access to credit when more is needed. Armed with their credit report, individuals can easily identify areas that may be reducing their credit rating. The credit bureau can help individuals with action plans to rectify their credit standing as well as continue to manage their financial obligations.
But it is not only individual consumers that benefit from working with the credit bureau. For lenders, the value and quality of the data and risk management solutions that a credit bureau can provide is immense.
For business it is vital to find, gain and retain profitable customers. The customer value chain extends from engaging with potential customers, to acquiring them, managing them once they are onboard, and sometimes, unfortunately, recovering debt from them. The success of these various stages hinges on having the right information available to improve efficiency and make the best decisions for the business.
We are moving into a world in which lending should be responsible as well as profitable. By helping to share credit information between credit and service providers, through credit reports and risk management solutions, credit bureaus are helping to strengthen the decision processes of credit lenders. This in turn allows credit and service providers to review a consumer’s credit or loan application more efficiently and responsibly.
As the credit reporting industry advances and matures we start to see new innovations brought to market that further assist businesses to make informed and objective credit lending decisions. In recent years, credit information sharing has morphed from the submission of largely ‘flat’ data to a more multi-dimensional data form. This allows for a bigger, deeper decision pool for credit and service providers and greater financial inclusion for consumers.
Historically, bureaus only tracked and held negative data on customers. Today, most bureaus hold both positive and negative data, which gives a holistic and dynamic view of existing and potential customers. Therefore, credit and service providers were previously only able to make basic and somewhat limited risk decisions with flat and simple data.
As Africa progresses its credit infrastructure through regulations and governmental support the value brought forward by the credit bureau industry only continues to grow and abound.
With a firm focus on leveraging technology and our data base assets, TransUnion, which is the fastest growing credit bureau in Africa, sees itself as being able to provide a ‘one stop shop’ for an enhanced customer base.
We plan on growing our consulting and training divisions and the ultimate intention is to position our brand as a genuine strategic partner. As our work force is almost entirely indigent in the countries in which we operate, we are also assisting in job creation and education.
TransUnion operates in a number of markets in Africa and is constantly looking at new markets. We understand what we do and we know the value that we can provide. We are ready and willing to target new markets where there are fundamental issues that we know we can solve. We replicate the footprints of our key strategic partners and understand their focus, their growth initiatives and the micro- and macro-economic factors within which they operate positioning us as the leaders in credit and risk information services worldwide.
About TransUnion (NYSE:TRU)
Information is a powerful thing. At TransUnion, we realise that. We are dedicated to finding innovative ways information can be used to help individuals make better and smarter decisions. We help uncover unique stories, trends and insights behind each data point, using historical information as well as alternative data sources. This allows a variety of markets and businesses to better manage risk and consumers to better manage their credit, personal information and identity. Today, TransUnion has a global presence in more than 30 countries and a leading presence in several international markets across North America, Africa, Latin America and Asia. Through the power of information, TransUnion is working to build stronger economies and families and safer communities worldwide.
We call this Information for Good. http://www.transunion.com/business