Alternative Financial Services are Growing Using Alternative Credit
Alternative financial services (AFS) are a massively lucrative and rapidly growing industry. According to recent industry studies, the market size was valued at over $10 billion in 2022 and is expected to continue growing through 2032. There are several reasons for this, including an increased need for capital, more flexibility, lower operating costs, and public change. Millions of consumers rely on AFS for their day-to-day needs and deliver crucial financial support to impactful subsets of consumers.
In fact, a recent FDIC survey found that nearly 5 percent -5.9 million people - of all households in the U.S. are unbanked, and more than 14 percent are underbanked.
So, how do you start attracting these consumers yourself? Continue reading and learn more about AFS and its role in the U.S., what services these institutions provide, and how alternative credit can help keep you ahead of the curve.
Alternative Financial Services Industry in a Nutshell
The term alternative financial services describes financial services offered by providers that operate outside federally insured banks and thrifts. Common examples of these institutions include check-cashing outlets, money transmitters, car title lenders, and payday loan stores. However, many of the products and services they provide are not "alternative"; instead, they offer the same or similar quality services and products usually offered by banks.
Please note that AFSs can also refer to financial products delivered through alternative channels such as the internet, financial services kiosks, and mobile phones rather than traditional brick-and-mortar bank branches or storefronts.
While these institutions may seem numerous and small, their actual impact lies in their ability to work with customers who struggle with more traditional banking. These issues can be inconvenient locations, a lack of flexible options, or, most importantly, an inability to properly consider an individual's alternative credit score. To put it in perspective, the U.S. alternative financial market accounted for 30 percent of the revenue share in 2022.
The Importance of Alternative Credit
While there are many factors to consider when looking at an applicant, many organizations default to traditional credit as the end-all for deciding a borrower's creditworthiness—especially large conventional brick-and-mortar institutions. While by no means is the default credit score a poor indicator, it's far from telling the applicant's full story. That's where alternative credit comes in.
Alternative credit gives lenders another essential set of data that can open up new avenues for any financial institution... especially AFSs. Unlike credit card usage, loan repayment history, and outstanding debts, alternative credit considers a broader range of data. This can include utility bill payments, rent payment history, bank account information, and even data from social media profiles. This score thrives on providing information on individuals with limited or non-existent traditional credit history, making it an invaluable tool to reach those non/underbanked consumers.
Take advantage of these scores through MicroBilt's new state-of-the-art iPredict Advantage 3.0 software today and contact one of our helpful representatives today.
