How does embedded scoring help?

The embedding of financial services has attracted both merchants and customers. As such, businesses are innovating and implementing financial solutions into their products at an increasing rate. Even though embedded finance is a relatively new concept, it has proliferated in recent years. Embedded banking revenues are expected to increase further, with Publicis Sapient predicting an annual growth rate of 41% from 2021 to 2025.

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In addition to generating new revenue streams, this innovative approach can serve as a crucial differentiator for merchants. Offering the right product at the right time enhances the customer experience, improves checkout conversion rates, and builds more loyal customers. Through embedded scoring, financial services can be more easily accessed, making the underwriting process more accurate, reliable, and secure. By doing so, financially excluded people can access financial services more easily.

“When considering the efforts of major financial players to enhance inclusivity, it is noteworthy to acknowledge the significance of new digital footprints and the utilisation of behavioural data analytics technologies to democratise financial access. Many lenders still rely on outdated scoring systems provided by credit reporting agencies (CRAs) or bureaus for assessing the creditworthiness of borrowers, limiting their ability to assign scores for applicants with little to no credit history, typically those in the middle to upper-income groups. 

The challenge for lenders is to determine a credit score for all borrowers, including those with limited or no credit history, which has resulted in financial exclusion for many people.”‍

By Michele Tucci, MD Americas & Chief Strategy Officer at credolab, extracted from What Are Some Changes Big Players Are Making To Be More Inclusive With SupraOracles, IBM and More

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By leveraging embedded scoring technology which uses machine learning algorithms, fintechs such as credolab and other next-gen credit risk companies enable almost half of the world's population without a bank account to access credit. With the customers' consent, smartphone and digital behavioural data are analysed in real-time to convert digital footprints into credit scores securely, transparently, and without any disruption to the user journey.

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Conclusion

Financial institutions can gain various benefits through embedded scoring, including enhanced security and transparency, streamlined processes, better customer experiences, and improved financial access. With embedded scoring, financial institutions can evaluate a borrower's creditworthiness in real-time with an added layer of security and transparency. This approach can also improve customer satisfaction and loyalty by providing effortless access to financial services. Moreover, embedded scoring can help financial institutions optimise their work, lower costs, and increase accessibility for financially disadvantaged individuals.

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