TransUnion CIBIL launched CreditVision NTC Score – a credit scoring solution that will enable credit institutions to assess the eligibility of new-to-credit (NTC) consumers who have never taken a loan or credit card from banks or financial institutions before. NTC consumers have no formal credit history and as such have historically been hard to assess and score. CreditVision® NTC Score incorporates an algorithm that uses an adaptive machine learning framework for continuously monitoring behavioural trends of similar data subjects to capture any major shifts in trends or variables. The score ranges from 101-200, with higher values indicating lower credit risk and reduced probability of default by the borrower. This scoring model is provided only to credit institutions and banks for credit risk assessment of NTC consumers.
Driving economic opportunities for NTC consumers while enabling their inclusion in the regulated financial ecosystem
India’s credit industry has witnessed a significant shift over the last decade, with increasing numbers of first-time borrowers (NTC) seeking credit opportunities from institutional lenders. Over the last two decades, insights and solutions from TransUnion CIBIL have facilitated opening of 8.10 crore loan accounts of first-time borrowers.
Speaking at the launch of the new score, the Managing Director and CEO of TransUnion CIBIL, Mr. Rajesh Kumar, said: “Majority of India’s population is under 40 years of age and this group is most likely to seek their first ever loan or credit card from banks and credit institutions. Lenders must explore the unique potential of using data insights and solutions to identify and service the credit requirements of this large consumer segment in order to tap profitable growth and support financial inclusion. With the launch of CreditVision NTC Score, we reaffirm our commitment to India’s credit industry by helping foster trust in the lending ecosystem while enabling access to economic opportunities for deserving new-to-credit consumers.”
Table 1 – Age-group share of enquiries by NTC Consumers (Based on TransUnion CIBIL consumer bureau enquiry data from Jan 2019 to Jan 2021)
|Age-group||NTC Consumers (enquiry %)|
|Below 25 years||24%|
|Above 55 years||8%|
Credit institutions are often cautious when lending to NTC consumers as there is no credit history to assess their probability of default on the loan. However, TransUnion CIBIL’s analysis shows that NTC consumers tend to prove lower risk and build a higher TransUnion CIBIL Score when they are given credit opportunities. Score analysis of consumers who were granted credit in Jan 2019 shows that a significant proportion of these NTC consumers were scored as prime-consumers (those with CIBIL TransUnion Score of 700 and above) after a one-year period.
– Of the NTC consumers who were given credit in Jan’19, 72.30% had a TransUnion CIBIL Score of 700+ in Jan’20
– Of the ‘below prime’ existing-to-credit consumers (TransUnion CIBIL Score of 300-699) who were given credit in Jan’19, 47.29% had a score of 700+ in Jan’20
– Of the ‘prime’ existing-to-credit consumers (TransUnion CIBIL Score of 700+) who were given credit in Jan’19, 85.90% had a score 700+ in Jan’20
“Our analysis clearly shows that if provided credit opportunities, NTC consumers can prove to be good borrowers and form a profitable customer base for credit institutions. By using the NTC Score, credit institutions can significantly scale profitable growth by tapping into the NTC market,” highlighted Rajesh.
Insights based on share of enquiries of applications by NTC consumers show that Two-wheeler loans account for the highest number of enquiries from NTC borrowers, followed by Consumer-Durable loans and Home loans.
Table 2 – Share of enquiries of applications by NTC consumers across loan types (based on TransUnion CIBIL consumer bureau enquiry data from Jan 2019 to Jan 2021)
|Loan Type||NTC Consumers (enquiry %)|
|Consumer Durable Loan||28%|
Source: TransUnion CIBIL Consumer Database
When analysed at a geographic level, data shows that demand for credit by NTC borrowers is more or less similar across geographies. The rural and semi-urban population together contribute to more than 54% of enquiries coming from the NTC segment.
Table 3 – Share of enquiries of applications made by NTC consumers across geographies:
|Geography||NTC Consumers (enquiry %)|
Source: TransUnion CIBIL Consumer Database
The CreditVision® NTC Score will enable credit institutions to astutely assess the risk associated with first-time borrowers and provide access to finance to them quickly and easily across geographies.
Providing an accurate and comprehensive picture of NTC customers
The demand for retail credit products has steadily increased in recent months following the shock from the COVID-19 pandemic last year. TransUnion CIBIL’s data analysis shows that although year-on-year (YoY) growth across key credit metrics has yet to reach pre-pandemic levels, there has been positive momentum for credit demand. In Feb- 2021, retail credit demand (as measured by inquiry volumes) was back to 91% of the levels observed in Feb 2020, and was significantly up from the low levels observed during the early months of the pandemic.
Using the CreditVision NTC Score along with the CreditVision Score, the lending industry will be able to score their entire applicant base. “On a monthly basis, approximately 24% of enquiries are made for loan applications by individuals who do not have any pre-existing credit history on our bureau whereas the number of loan accounts opened by NTC borrowers stands at 16%, clearly indicating the opportunity of providing access to credit to this segment. In order to cater to this demand in the NTC segment, lenders will need to adopt data driven lending processes supported by advanced analytical solutions like CreditVision NTC Score to get a deeper understanding of the consumer profile while increasing approval rates within the lender’s current risk tolerance,” concluded Rajesh.