5 Benefits of Alternative Data for Banks and Financial Institutions from Enriched Credit Scoring to Lead Qualification

We’re talking about the infamous Alternative Data: an immense pool of information that includes datasets ranging from downloads and application usage metrics to the sentiment expressed by users online, social media behaviors, website traffic and much more.

Now more than ever, as a response to the economic crisis brought on by the Covid-19 pandemic, banks and financial institutions are on the search for innovative solutions that leverage Alternative Data and are linked to social sentiment and UGC (user-generated content).

Alternative Data for Finance: 5 major applications

We’ve identified 5 major applications of Alternative Data that are gaining ground across the financial sector

Alternative Data allows lenders to take their evaluation one step further, by analyzing the reputation of both the business requesting the loan and the products and/or services they sell.

The perception and level of appreciation expressed by customers is a very accurate predictive parameter for the future performance of a company.

As Industria Italiana (Italian Industry) magazine revealed, “Financial statements and reports can be artfully constructed to lower the level of risk and act as a bridge to attempt fraud. Online reputation analysis is a litmus test, the stamp of quality of financial data.”

Let’s explore a practical example:

A small business that produces leather bags is asking the bank for funding to open new stores. If, in addition to information on the company’s financial performance, the bank also has access to the analysis of the brand’s online reputation, the bank will have a more complete picture of the business.

Who is the company’s target audience? What are customers saying about the quality of their products and service on social media and review channels? Are their products appreciated more or less than their competitors?

Data Appeal has provided this type of service to Unicredit and is continuing to do so for other major international banks.

In addition, historical data is a very powerful and early predictor of potential upcoming problems and critical issues. When combined with real-time information, Alternative Data provides key insights on decreasing performance trends that might be warning signs of potential financial issues in the upcoming future.

Let’s explore a practical example:

A small hotel group that owns three properties is requesting a loan from a local bank. Over the course of 2020 and the first half of 2021, both financial statements and popularity and reputation data reveal a bleak story. One without many guests, online feedback, income and revenues. However, by analyzing historical data up to 4 years in the past, the bank was able to detect a strong performance with thousands of consistently positive reviews and online feedback as well as little-to-no seasonality impact throughout 2017, 2018 and 2019.

By taking advantage of these new datasets, seamlessly identify the points of interest in any selected territory where services or products are unavailable, or conversely, where competitors are located.

Moreover, by leveraging alternative data, enrich the profile of each company in your database with detailed, qualitative insights, such as the company’s Sentiment score (perceived level of satisfaction in the eyes of customers) and popularity.

Let’s explore a practical example:

Data Appeal supports Poste Italiane, the National Italian Postal Service, in a data enrichment project that’s based on artificial intelligence technology. To create a more complete and reliable profile of operators and potential customers, Data Appeal analyzes and catalogs reputation and feedback data across online channels and social networks.

The result? An enriched CRM complete with exclusive insights and performance KPIs to strategically evaluate new business opportunities. 

Monitoring your reputation helps exceed customer expectations, increase your clientbase, win market share, compete more strategically against competitors and adapt your products and services to better suit the unexpressed needs of the market. 

Collecting and analyzing online reviews and content posted by users relating to your products, services, points of sale and brand is the most effective way to uncover the true needs and expectations of customers. Better understand their experience to leverage what’s most appreciative and efficiently solve critical issues. 

Let’s explore a practical example:

An Italian bank collects and monitors – in real time – all conversations and user reviews on its branches in Milan as well as those for a major competitor in the same territory.

The semantic analysis reveals that the majority of negative comments about the competitor are related to the lack of assistance of telephone operators in the individual branches. Clients are never able to talk to the staff and, in their online reviews, they have expressed that it’s extremely frustrating.

The bank conducting this analysis, which provides excellent telephone support, decides to focus on their strength, highlight it more throughout their marketing and communication and inform their employees to keep up the good work.

This tiny datapoint is quite powerful and can be used to reveal a complete picture of the financial situation of any company applying for a commercial loan or mortgage.

Through a special algorithm developed by Data Appeal, financial managers can search for commercial activities and businesses linked to the VAT number of a company under review.

Let’s explore a practical example:

A bank needs to validate the correspondence between select VAT numbers applying for bank funding and the companies corresponding with the VAT numbers to effectively the true and accurate solvency.

It’s possible that these VAT numbers are also registered in other companies of which the bank has no correspondence. It’s critical to keep the financial situation of all companies related to a business in mind when underwriting and granting a loan.

This is one type of service Data Appeal provides to major national banks. Through a unique dataset, our customers can access all VAT numbers and their matches to enrich their internal underwriting and lending progress.