There is a pressing need for a new approach because BNPLs are reporting much higher bad debt impairment rates than credit cards. For every USD 1 billion of processing volume BNPLs write down USD 19.2 million of bad debt compared to USD 270 thousand per billion for credit cards. At the same time, millions of good customers worldwide continue to experience service denials because BNPL providers and ecommerce merchants are unable to accurately determine their level of risk. This includes a significant proportion of returning shoppers who are treated as if they are buying something online for the first time. This is happening because credit decisions are missing important data.
Alternative Credit Decisions enriches BNPL credit scoring models with over 100 attributes that give a more accurate picture of a buyer’s true credit risk. These include highly valuable data points like a buyer's positive transaction history, account history, purchase history, and unpaid amounts. This is made possible by global network intelligence and real-time graph networks.
BNPLs and enterprise merchants currently use credit bureau checks to increase their confidence in an approval decision and pay a fee for each check. Alternative Credit Decisions reduce the need for these checks altogether to save costs and improve accuracy. The product also helps customers rationalise other third-party data vendor costs.
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