Credit bureau illion has launched a new risk rating service for credit providers based on consumers’ transaction histories.
The illion Transaction Risk Score has been designed to tap into the increased flow of customer data that is expected to follow the introduction of open banking and complement conventional risk scoring based in credit file information.
illion’s head of modelling, Barrett Hasseldine, said transaction banking records provided additional information that can sharpen a credit provider’s underwriting. The data includes cash usage patterns, income frequency and loan repayment trends.
Hasseldine said during trials, illion identified that some people take a lot of cash out of their bank account as soon as they have been paid. This behaviour is a red flag because it could indicate spending on gambling or a desire to keep money away from a credit provider.
The data shows how people pay for services such as mobile phones. Using a prepaid plan may indicate problems managing monthly budgets.
Transaction data shows whether people pay their rent on time.
“The use of transaction data in risk assessment is as big a development as the introduction of comprehensive credit reporting,” Hasseldine said.