Credit scoring is needed by financial institutions to assess whether potential customers are eligible for credit products — such as loans, financing, or credit cards. In its execution, many credit score models can be applied by related institutions, adjusting business processes or application mechanisms. However, despite having a different approach, what is done is the same: collecting customer data to ensure that they will become good debtors.
The data takes various forms, the most important thing is that it can show a person's financial ability. For this reason, usually, one of the types of data collected is historical records related to a person's finances. It can be previous credit or current accounts owned. In the following, we will discuss three types of credit score models that financial institutions have widely adopted — and how modern credit scoring services can play a role in providing service improvement and credit quality.
Conventional Credit Scoring
This credit score model utilizes data provided by the regulator, in this case, the SLIK (Financial Information Service System) issued by the Financial Services Authority (OJK). In accordance with the designation defined by the OJK, SLIK can be used to facilitate the process of providing funds, implementing credit or financing risk management, assessing debtor quality, managing human resources for SLIK reporting parties, verifying cooperation between SLIK Reporters and third parties, and improving financial industry discipline.
Financial institutions such as traditional banks or multi-finance companies (eg. BPR, KSP, etc.) usually use SLIK as their main basis for determining the creditworthiness of prospective customers. However, SLIK can be accessed by anyone, including requests from prospective customers to OJK. The application for SLIK can be made online through the channel provided by the OJK or by visiting the nearest OJK office.
Internal Credit Scoring
Furthermore, there is an internal credit scoring type, namely a credit scoring platform that utilizes data owned by the relevant institution. Usually, this credit score model is managed by industry players who already have a large user base — whether they come from banking or other sectors. For example, in banking, customers who have used their services for several years can be assessed for the track record of transactions from their accounts to see potential income and expenses.
However, this does not stop at the banking sector alone. Take e-commerce for example, they can use internal data (in the form of purchase transaction data) to meet credit assessment needs. For example, what Tokopedia does through the TokoScore platform for credit scoring needs for their lending services. They usually still combine data from external sources, either from regulators or other alternative services, so that the assessment results are more precise.
Alternative Credit Scoring
Alternative credit scoring services are provided by third parties. Financial institutions can use it to get additional data to give someone a credit rating. This alternative data is usually mined from various sources, for example, monthly PPOB transactions—payments for electricity, water, etc.—some use telecommunication data, e-wallets, and others.
The use of alternative credit scoring services has received regulatory umbrellas from the OJK, through the rules regarding Digital Financial Innovation contained in POJK No.13/POJK.02/2018.
The way to use alternative credit scoring services is usually divided into two models. Firstly, through an API-based system. The assessment is carried out through a platform owned by the relevant financial institution — the processing occurs at the backend so that it is not visible to the user. This model can be applied to fast loan services, such as cash loans or paylater.
The second option is that financial institutions can get a special dashboard provided by credit scoring providers to help analyse the customer's financial condition. This model can be adopted by banking services and other institutions, where an alternative credit scoring platform is used as an additional service to assist the analysis process.
Finantier’s Credit Scoring Service
Finantier is an Open Finance provider in Indonesia, with one of the services in the form of alternative credit scoring. The services currently owned are registered and supervised by the Financial Services Authority. Financial Score (as the product is called) provides a reliable and comprehensive credit scoring system, combining user financial data with other alternative data.
Providing guaranteed uptime of up to 99.9% and security (encryption) at the level of the banking system, Finantier Score also provides lightning performance with processing in seconds. This not only makes analysis work easier but also provides convenience to users --- because in the traditional credit assessment process, this can take hours, even days.
The use case for using Finantier's alternative credit scoring service is open to various types of industries, ranging from digital banking, fintech lending, and fintech paylater to multi-finance. Finantier also provides a simple credit scoring dashboard that is easy to understand, equipped with a detailed rating index for various aspects. For more details, visit the official Finantier website via the following link: https://finantier.co