I am unashamedly a millennial. I engage in many of the behaviours that make my generation distinctly different to the one that came before it. I am highly individualistic, perhaps some would even say narcissistic. I’ve had social media and access to the internet for as long as I can remember. I don’t really recall a time before having a mobile phone. I spent much of my life in education striving to get the qualifications that my parents and teachers had told me I needed. I studied sustainability, and for a while, I dedicated my life to saving the world and volunteering. I am in so many ways a complete cliché.
When asking the question of whether I am creditworthy though, does any of this information help? Sure, you can look at my social media to get an indication of how stable I am, perhaps my LinkedIn can give an idea of the kind of job I do and the types of people I have around me, but does it really tell us much more than that? But even beyond that perhaps my LinkedIn profile is out of date or the information listed is just purely made up.
How about if you submit an application to the credit bureau? What kind of information can you find about me there? I only moved to Sweden a few years ago, I am an immigrant here, and I studied for the first two years of that. Ahead of moving to Sweden, I spent another three years in China to study and work purposes. Like many others of my generation, I have quite an international style of living and travelling is a common aspect for most of us. Although the list of pros coming with those aspects can be made long, building a traditional credit history is not one of them.
First World Problems
Now, I’ve been working full-time for just under two years. I don’t have a credit card, car insurance or any outstanding loans. When I recently requested a credit assessment on myself, the credit bureau had nothing. The data they had on me was limited to less than half a page.
How do you assess people like this? Based on data from the credit bureau alone, banks and other financial organisations can easily classify me as a subprime lending customer. But based on what you know so far, am I high risk or am I low risk? The information sources above provide an indication of my financial capability, but so much of the picture is missing.
Even though I tick most boxes of being a typical millennial, I consider myself one of the luckier ones, compared to others in the same category. Why? Well, there are many reasons for that but in this context, the truth is, for many millennials, being qualified for a loan at all can be tough without being able to provide proof – even in the subprime market.
The Missing Piece
So, what’s the missing piece to make the picture complete? Well, although I do not use banking in the traditional ways and I do not have car insurance or any loans – I do have a stable job, I do save money, and I consider myself a responsible person. How can I prove this? And more importantly – can a bank or other financial institutions prove my financial capability? The answer to this lies in transactional data.
When analysing my bank transactions, banks and other financial organisations can also prove I am who I say I am, there are no fraud indicators; nobody else is using my account. I use my bank like an average person; I don't have an addiction to gambling and my employers always pay me the same amount at the same time each month. Transactional data can verify my income and my identity. My transactions even show that I pay money to the union each month, so if I were ever so unlucky as to lose my job – 80% would be covered by social security. In other words, analysing someone’s transactional data is quite a waterproof way of determining their financial capability.