Smart Lending & Underwriting: Banks turn to Alternative Data for more reliable credit scoring

smart lending

In recent years, more banks and financial institutions are relying on Alternative Data linked to the online reputation of SMEs to more reliably assess risk and make strategic commercial underwriting and lending decisions. 

Traditional lending for SMEs: A slow, expensive and risky process

For an average business owner requesting a commercial loan, the traditional lending model typically takes a bank or financial institution several weeks (or even months) to process, underwrite and approve. 

On average, business owners must go to their branch several times and provide an infinite amount of documentation. Yet today, when anyone can open an account, make investments and multi-million dollar purchases online (and in just a few clicks), the timeline for a commercial loan seems a bit unreasonable and unjustified. 

  • For the business requesting the loan, waiting times can negatively affect a negotiation or project. 
  • For the lending bank, the outdated procedures of a commercial loan are not 100% secure; they do not take into account the variables that can increase the risk for insolvency. 

The advantages of Smart Lending for both SMEs and banks alike

To solve these problems, many banking institutions are adopting new business models such as “Smart Lending” and “intelligent financing”.

The result? An enhanced financing process based on new, accurate and comprehensive data. It’s fast and simple for businesses, yet also reliable and efficient for banks.


ADVANTAGES FOR SMEs (small & medium-sized enterprises): 

  • Process Simplification: If the business requesting a loan is already part of the bank’s customer portfolio, it’s not necessary to provide additional information.
  • Effective Results: The process is standardized around the world. Each lending institution evaluates identical criteria.
  • Speed: Data-driven insights and lending recommendations are provided in minutes or in real time so business owners get a quick response to their approval status.
  • Simple & Seamless: The process takes place online, both on mobile or PC, and does not require a physical meeting. 



  • Improve Customer Experience: Your clients will have a better experience, which in turn builds loyalty and enhances retention 
  • Security & Risk Mitigation: These types of financing and investments are valued with a low margin of error. 
  • Faster Process: Funding requests are processed much faster, which saves time for the entire commercial lending team (from origination to underwriting).
  • Reduced Costs: A faster and leaner lending process reduces costs.


smart lending

Sentiment and reputation data: An essential ingredient to Smart Lending

One of the most essential characteristics of Smart Lending is to refine and make risk assessment algorithms faster and more effective. Thanks to Alternative Data, or non-traditional datasets banks have on hand internally, lending institutions can 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.

Among the most valuable Alternative Data for banks is qualitative sentiment data, data that relates to the reputation, degree of appreciation, satisfaction and perception of any business or brand in the eyes of customers.

This data provides banks with an even more complete, detailed and reliable economic picture of SMEs, therefore making it easier to evaluate its lendability and credit worthiness. 

Especially in times where financial data does not tell the whole story, such as the lack of earnings and revenue for many businesses throughout the Covid-19 crisis, reputational data is invaluable for financial lenders to make decisions on the likelihood of a business drawing clients in the future and turning a profit. 

smart lending

Why should a company’s online reputation be of interest to a bank?

Let’s look at a real-world example. A very popular company, whose customers speak enthusiastically about their experience online, will have more opportunities to grow and borrow money than its competitors who don’t have a large social media presence.  Online reputation is an extra element to more accurately assess creditworthiness and detect to what extent a company is economically able to repay debt, and therefore get approved for a commercial loan. 

The reputation of a company and the territorial context in which it operates, especially in respect to its competitors, are factors that should be integrated into algorithmic risk assessment models for underwriters to leverage when evaluating the health of a business.

Enhance underwriting with new datasets for more accurate credit scoring

Many tests have been performed to compare traditional models against the new methodology that encompasses reputation and sentiment data. 

Ultimately,  in the case of both existing and new customers, the new Smart Lending model is much more accurate in analyzing creditworthiness than traditional models. 


How can I access sentiment & reputation datasets? 

While Alternative Data is an essential aspect to Smart Lending, a company’s online reputation and popularity are not information a bank has on hand, and moreover, are impossible to calculate without specific technology.

The best way to access qualitative datasets is to rely on an Alternative Data provider specialized in mapping and collecting this type of information from multiple sources, not just from one channel or the most popular ones.

The Data Appeal Company is one of the most avant-garde companies around the globe that supplies geo-localized and reputational datasets to banks, insurance companies and financial institutions. One of the strengths of Data Appeal is their hypergranular analysis, which transforms raw data into actionable indicators. These international benchmarks help to evaluate the effectiveness and performance of companies across sectors and territories. 

Data Appeal supports major banks and financial institutions in the collection, analysis and integration of Alternative Data on SMEs, and has developed algorithms to accurately define creditworthiness from a qualitative perspective.

Download our free ebook “Smart Lending: Alternative Data for Faster Credit Underwriting & Risk Mitigation”

(IMAGES SOURCE: ​​Oliver Wyman)


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