Fintech Innovation Can Improve Financial Inclusion

Access to affordable credit is a critical part of life for U.S. consumers. It can potentially help them buy a car, rent an apartment, start a business, and ultimately build wealth. Yet, research from 2022 shows that almost 106 million U.S. consumers are unable to secure credit or secure it at affordable rates because they are credit invisible, unscorable or have a subprime credit score.  These consumers may face roadblocks that result in more expensive credit options, unaffordable insurance premiums, limited housing options and more.

 

Continued innovation is needed in the financial services space to create a more equitable financial ecosystem. That’s why Experian has focused its efforts on transforming the credit landscape with new digital products and features that empower consumers with more control over their credit and financial health.


Building Credit Without Debt

Traditionally, consumers build a credit profile by repaying their debts like making credit card payments or paying off a loan. These options require a consumer to take on debt and the lender to report the payments to the credit bureaus to build their credit history. However, consumers make recurring payments on a multitude of expenses that have never been reflected on a credit profile such as payments for utilities or rent. We believe this kind of payment history reflects positively on a consumer’s ability to meet their financial obligations. So, Experian evolved the traditional reporting model with the launch of one-of-a-kind Experian Boost®[1], a free feature that allows consumers to get “credit” for these types of payments by directly contributing their payment history to their Experian credit file. Since the launch in 2019, more than 14 million people have connected to Experian Boost and increased their FICO® Score[2] by an average of 13 points, among those that saw an increase.

 

This year, we continued to advance on our mission of Financial Power to All™ with the recent launch of the Experian Smart Money™ Digital Checking Account & Debit Card[3] that embeds Experian Boost. Now consumers have a digital checking account with convenient access to Experian Boost and the many tools a free Experian membership[4] offers all in one place. We believe this will extend the reach of our Experian Boost to help more people, while also engaging them in other financial resources that support their overall financial health like keeping more money in their wallets, finding a better credit card or loan, and be better protected from identity theft.

 

Why we all win

While innovative offerings like ours can have a positive impact on consumers, this halo may also broadly reach financial institutions. In this case, as more consumers become credit visible and nurture their credit scores, they can potentially become eligible for more financial opportunities that help them achieve their goals. This may give banks more engagement opportunities and a more diverse base of customers. Meanwhile, with more insight into how consumers manage their financial obligations with richer credit files, banks can make more informed lending decisions.

With this in mind, we consider the Experian Smart Money Digital Checking Account to be a complementary offering—one that especially benefits a critical group and expands the market for all. This program is most beneficial for young adults and those looking to build their credit profile. With Experian, consumers could follow a journey from credit invisible to visible, potentially increase their credit scores, and graduate into other financial opportunities and products. This includes engaging outside of Experian as we are not a bank and will not be extending credit or lending.

Consumers need products, tools and resources that are inclusive and help them meet their financial goals. Today, this requires new thinking and new ways of conducting business by financial institutions. Individually we may not be able to solve every challenge or roadblock. With collective efforts however, a more equitable financial system can be achieved that ultimately benefits everyone.

 

References:

[1]Results will vary. Not all payments are boost-eligible. Some users may not receive an improved score or approval odds. Not all lenders use Experian credit files, and not all lenders use scores impacted by Experian Boost®. Learn more.

[2] Credit score calculated based on FICO® Score 8 model. Your lender or insurer may use a different FICO® Score than FICO® Score 8, or another type of credit score altogether. Learn more.

[3] The Experian Smart Money Debit Card™ is issued by Community Federal Savings Bank (CFSB), pursuant to a license from Mastercard International. Banking services provided by CFSB, Member FDIC. Experian is a Program Manager, not a bank.

[4] Only available in the fifty U.S. states and the District of Columbia


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