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Africa's first telco data credit score aims to bring the ‘invisible' into the financial fold
TransUnion and Chinosis have teamed up to create Africa's first telco data credit score and bring millions of 'invisible' Africans into the financial fold.
Just 13% of South African adults have a credit card, which is a small fraction of the population participating in the financial ecosystem.
Financial service providers rely on a rigid credit scoring framework to gauge whether someone is a viable borrower. This results in a huge pool of people who operate outside this view, stranded in a financial blindspot.
A partnership between TransUnion and Chenosis, an MTN Group technology venture, aims to change this status quo. The two companies are set to launch Africa's first phone data-based scoring system by Thursday, 3 July.
A new lens for old blindspots
The continent's financial ecosystem mirrors its colonial borders: fragmented, exclusionary and sometimes slow to evolve.
'Exclusion is part of the African narrative,' said Lee Naik, TransUnion CEO, reflecting on his own roots in Chatsworth, an Indian township in KwaZulu-Natal, where he grew up under apartheid.
'When I say I can feel what it means to be disconnected from the broader ecosystem, it's literally how I grew up,' he said.
Africa has more than 350 million people who are disconnected from the financial system, and yet more than 510 million are subscribed to mobile services.
'For many Africans, for many South Africans, we feel disconnected. Having access to mobile telephony isn't the answer in itself,' Naik said. 'We all want to be heard. We all want to be seen. We all want to be known. The question is, does telco data allow us to do that?'
Your phone is a financial mirror
The scoring system parses numerous signals – how frequently a phone is used, phone number stability and phone swapping, to name a few – to piece together a view of financial activity.
'A mobile device is not just a device. It helps you get a view of the reflection of how a person lives,' said Waheem Amra, head of product and platform at Chenosis.
If you look at someone's recharge pattern, for instance, it might give you insights into how they earn and manage their money, Fatgie Adams, TransUnion's head of credit risk solutions, said.
Another metric taken into account is sub-tenure, which is how long you've had your mobile device, along with how long you've had a phone number, he explained. If you've gone through six phone numbers in a short period, it signals something different than someone who sticks with their number, he explained.
'We don't just collect this data. We aggregate it over time so it's physically sound. We transform it and structure it and pass it on to a translator.'
Amra explained that the group of people this system aims to aid are not financially inactive. The problem is rather that traditional credit scoring systems can't see how they spend their money.
Tackling financial exclusion
According to Naik, about 16 million South Africans remain excluded from the financial system and another four million are underserved.
The new scoring system aims to bring these people into view by interpreting financial behaviour previously dismissed.
'Are we adequately and accurately assessing these individuals for their creditworthiness?' Adams asked. 'Or are we merely declining them because they don't look like the borrowers of the past?'
The system has implications beyond individual borrowers. Providing financial products to small businesses employing between one and five people can act as a way to address unemployment in the continent, Naik said.
How does this affect you?
Ease of access to credit: If you're a South African with a meagre or non-existent credit profile, this scoring system could help you borrow money.
An opportunity to progress: Better credit means lower borrowing costs, a chance to move from the informal to the formal financial sector, and a path towards financial stability.
Financial independence: Access to loans can empower you to pursue goals, like starting a business, improving your home or sending your children to school.
Small business growth: Small enterprises can use this scoring to access funding and employ more people.
Privacy, consent and trust
Of course, accessing phone data brings responsibilities. TransUnion says that consent, compliance with the Protection of Personal Information Act and scalable trust are all baked into this system.
'Before any data can be transferred we get consent from the customer, but they can also opt out of it,' Amra said. 'It's a transparent process where the customer is completely in control.'
Every confirmation of consent is also time-stamped and audited, adding another layer of oversight to assure both consumers and lenders that the data is fair and transparent.
A precedent for Africa
In trialling this scoring approach with major South African lenders, the two companies found that 1.9 million previously 'invisible' people fell into view, a 35% improvement in predicting credit performance and a 20% drop in bad debt.
Today, TransUnion operates in eight African markets. The goal is to expand this system to all 54 countries on the continent and onboard more telcos, Naik said.
The telco data score isn't meant to replace traditional credit scoring, but to get a more complete picture of an individual, Amra said. 'We didn't just create a product, we created a new capability for the industry.' DM
