FINANCIAL SERVICES ARE CHANGING – SO IS THE FUTURE OF CREDIT CARDS AND LENDING

The way we access, understand, and manage credit stands to be revolutionized as emerging data sources and analytics provide more personalized risk models while startups reimagine lending. The future of credit scoring looks beyond flawed FICO models toward real-time insights and continuous evaluation.

In the US, traditional credit reports and scores often exclude or penalize minorities and youth demographics due to lack of credit history. However, alternative data sources now assess creditworthiness in more equitable ways. Cash flow analyses provide evidence of ability to pay while accounting history offers reliability signals. Even rent reporting via platforms like Boom can now factor towards credit scores.

As the types of data assessing eligibility rapidly multiply, the risk modeling behind it is accelerating too. Instead of static reports, machine learning applied to thousands of attributes around identity, behavior, transactions, assets and more enables dynamic credit decisioning. Rather than solely relying on past repayment history as an indicator of future reliability, predictive intelligence more accurately prices risk – and better serves borrowers.

Financial technology companies take this further by automating the lending process via intelligent algorithms. Startups like Upstart and Lendbuzz cater to niche segments traditional banks neglect, using alternative data for instant decisions. Others reimagine pay-as-you-go approaches decoupling payment size from credit limits. Credit will become more accessible and affordable thanks to such fintech innovation.

However, the ethics around data usage and unintended consequences that widen inequality require vigilance. Extensive research must validate new risk models avoid exacerbating issues or discriminating unfairly. Still, used properly, unprecedented data insights promise more accurate risk management.

For consumers, better educational tools are key to improving understanding and financial health. Interactive apps modeling impact based on behaviors build literacy for younger generations. Though predictions point to mainstream adoption of dynamic credit by 2030, financial inclusion regardless of history or demographics remains central to that sustainable, responsible future.