The document discusses how lenders can use alternative credit data to expand access to credit. It provides an overview of Experian's Clarity Services, which collects data from non-traditional lenders and has information on 62 million consumers. Analytics of Clarity data show attributes that predict loan performance and opportunities to approve more consumers while maintaining risk levels. Lenders can use Clarity products for various credit use cases like decisioning, account review, and collections. The key takeaways are that Clarity has more alternative financial services data than other sources and that using this additional information can provide important consumer insights beyond traditional credit data.

1. ©2017 Experian Information Solutions, Inc. All rights reserved. Experian and the Experian marks used herein are trademarks or registered
trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the trademarks of their
respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior
written permission of Experian. Experian Public.
Trends in
Alternative Financial Services
How lenders can capitalize
March 20, 2018

2. ©Experian2
Speakers
Paul DeSaulniers
Sr. Director, Experian
Christine Leddy
VP, Clarity Services

3. ©Experian3
Agenda
• Alternative Data
• Clarity Services
• Analytics
• Use Cases
• Q&A

4. ©Experian4
Starting point:
U.S. population by credit data coverage
(through lens of traditional national credit bureau)

5. ©Experian5
TRADITIONAL CREDIT DATA
Data assembled and managed in the core credit files of the
nationwide consumer reporting agencies, which includes:
• tradeline information (including certain loan or credit limit
information, debt repayment history, and account status)
• credit inquiries
• information from public records relating to bankruptcies.
It also refers to data customarily provided by consumers as
part of applications for credit, such as income or length of
time in residence and employment.
ALTERNATIVE CREDIT DATA
Data that are not “traditional.” We use “alternative” in a
descriptive rather than normative sense and recognize there
may not be an easily definable line between traditional and
alternative data.
Examples include:
• Alternative Financial Service data (Short term/ Payday
Loan, Rent to Own)
• Rental payments
• Asset ownership
• Utility payments
• Full File Public Records
• Consumer permissioned data
What is Alternative Credit Data?
All information that is FCRA compliant

6. ©Experian6
Lender challenges we are striving to address with
alternative credit data?
Consumers
 Increased access to affordable
financing
 Speed / ease / convenience
 Build credit
Traditional Lenders
 Strengthen & expand
portfolios
 Increase & sustain
competitive advantage
 Improve customer
experience
Adjacent Players
 Enter markets via new business
models (e.g. Fintech)
 Grow in underserved segments (e.g.
Alternative Finance)
 Differentiate data assets & engage
consumers (e.g. Information Services)

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8. ©Experian8
About Clarity Services
Largest nationwide, FCRA-regulated credit bureau that specializes in
gathering and providing information about non-prime consumers
Powerful real-time fraud detection and credit risk management solutions
Rich data on 62 million unique consumers, representing the majority
of the U.S. non-prime consumer population
Proprietary, real-time technology, flexible architecture & continuous
innovation to be the leading provider to the most sophisticated,
analytical and technology driven online lenders
nonPrime101: Industry leading research showing credit usage
behaviors, activities, and needs of non-prime consumers
Founded in 2008; Headquartered in Clearwater, FL

9. ©Experian9

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The Unique
Clarity Data Set
• Unique Contributors
• Unique Data

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Unique Contributors
Non-Traditional
Lenders
• Online and storefront short-term unsecured
• Online and storefront non-prime installment
and line of credit
• Marketplace
• Car title
• Rent-to-own
Traditional Underbanked
Financial Services
• Non-prime and secured credit cards
• Non-prime auto loans
• Retail installment and POS credit
• Finance company installment
Other
Sources
• Prepaid debit card “KYC” and ID verification
• Check cashing
• Debt collection
• Wireless providers

12. ©Experian12
Unique Data
• Name
• Address
• Phone #
• Bank Routing & Account Number
• SSN
• Tradeline Type
• Driver’s License number
• Employer
• IP address
• Housing status
• Email
• Date of next payday
• Pay cycle
• Net monthly income
37 Data Attributes From Consumer Loan Application
• Real-time reporting on
loan status with nightly &
weekly tradeline updates
• Unique data to Experian

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• Predictive attributes that include identity and
stability attributes from Clarity inquiry data.
• Suite of stability attributes designed to verify
identity and risk.
• FCRA compliant and available for adverse
action.
• Uses trended data to:
o Analyze consistency of information
provided by applicant over time.
o Determine the stability of information
provided by the applicant.
o Link between the current application
and past applications.
Alternative Credit Data Products
Clear Fraud Attributes Clear Credit Attributes
• Predictive attributes designed for decisioning or
use as inputs to models.
• Attributes available at consumer and tradeline
levels.
• Visibility to inquiry and loan performance.
• Trended data provides up to 3 years inquiry
data, 7 years repayment history.
• Available for:
o Prescreen credit marketing.
o Online acquisitions and decisioning.
o Account review and line assignment.
o Archive analysis and custom model
development.

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Analytics

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Market Trends
100 123
236
314
356
0
100
200
300
400
500
600
2013 2014 2015 2016 2017
100
149
376
446
581
0
100
200
300
400
500
600
2013 2014 2015 2016 2017
100 103 122
206
172
0
100
200
300
400
500
600
2013 2014 2015 2016 2017
Growth in Online Single Pay Loans
Growth in Total Online Small Dollar Lending
Growth in Online Installment Loans

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Installment Lending Trends
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
2013 2014 2015 2016 2017
0
2
4
6
8
10
12
2013 2014 2015 2016 2017
TermofLoaninMonths
Average Amount of an Online Installment Loan Average Term of an Online Installment Loan

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Hit rates
and
performance

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Hit rate analysis methodology
Client bankcard
newly opened trades
Full Clarity
consumer file
Hit Rate Analysis
(consumers with Clarity hit)

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3%
12%
32%
51%
62%
8%
4%
29%
29%
33%
3% 2%
0%
10%
20%
30%
40%
50%
60%
70%
Hit rate
% of Hits
Bankcard tradeline hit rate
Alt
Finance
18%
No Alt
Finance
82%
632
724
707
Average VantageScore
Hits
No Hit
Overall
18% of consumers with a
bankcard trade matched
to Clarity Alternative
Finance data

20. ©Experian20
Bankcard 5%
Thick 5+ trades 4%
Alt Data Non-match 3%
Alt Data Match 13%
Thin <5 trades 10%
Alt Data Non-match 7%
Alt Data Match 23%
Bankcard flow with bad rates

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Decision
trees

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Clarity attribute analytics
Using decision trees to identify attributes that predict performance
VantageScore® Clarity Attributes
CHAID analysis
LOW
likelihood
of bad
HIGH
likelihood
of bad
Bad = 90+ days past due in first 12 months
Includes new loans booked 3Q2016

23. ©Experian23
Identify emerging consumer opportunities for
universe expansion
Bankcard - Thin and Near Prime
10% Bad Rate - Bankcard Thin
11% Bad Rate - Bankcard Thin Near Prime
Low Risk High Risk
VantageScore
• Generic risk score that signals higher risk of going 90+ the lower the score
Non-traditional Inquiries in 1 year
• No presence of recent non-traditional inquiries signals lower risk
Payday inquiries
• Typically having payday inquiries signals higher risk, but coupled with the number of paid off Clarity
loans is positive, and less risky
Number of paid off loans
• Showing positive payment on payday loans is not captured in the traditional credit bureau
Segment bad rate10%
VantageScore
601-660
Non-traditional
Inquiries in 1 year 0
Payday Inquiries in 3
years 1+
Number of paid off
loans 2+

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Classify riskier segments
Bankcard - Thin and Near Prime
VantageScore
601-660
Low Risk
VantageScore
601-660
10% Bad Rate - Bankcard Thin
11% Bad Rate - Bankcard Thin Near Prime
VantageScore
• Generic risk score that signals higher risk of going 90+ the lower the
score
Clarity Inquiries
• Major separation where Clarity inquiries are present, <2 versus 3 or
more as displayed here
Number of bank accounts seen
• Consumers with more than 2 bank accounts signals high risk
Unique zip codes seen in 1 year
• Signals consumer may be a bit more transient, but still less risky than
those seeing Clarity loans
High RiskLow Risk
Segment bad rate 31% 32%
Clarity Inquiries in 1
year 3+
Clarity Inquiries in 1
year <3
Number bank accts
seen 2+
Unique zip codes seen
in 1 year 2+

25. ©Experian25
The power off adding Alternative Credit Data
Near Prime Population
0%
5%
10%
15%
20%
25%
30%
35%
40%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Cumulative%ofBadAccounts
Top % of Score
Clear Early Risk Score VantageScore 3.0 Baseline
With a traditional risk score
you can approve 10% of
the population inside your
risk criteria
By adding AFS data you
can approve 16% of the
population inside the same
risk criteria 60% lift in
performance

26. ©Experian26
Key predictive alternative financing data
A Sample of Predictive Attributes
 Number of inquiries
o Payday
o Non-traditional
o Installments
 Number of online installment loans
 Number of bank accounts
 Monthly income stability
 Number of paid off loans
 Unique cell phones seen in 1 year
Available data and attributes
Over 950 attributes for decisioning and
modeling variables
3 years inquiry data
7 years loan performance data
Consumer and tradeline level
Alternative Financing
Differentiators
Loan type: non-traditional, payday,
installment
Performance: loan performance, loan
amounts, delinquencies, paid/unpaid
Stability: number of employers, unique
home phone, zip codes
Stability indicators
Predicts the likelihood of early
payment default for short-term loans
Higher scores represent lower risk
Useful with interaction with other
attributes, predictive power with
traditional market

27. ©Experian27
How can lenders use
these products?

28. ©Experian28
Credit Use Cases
• More accurate decisions on consumers that otherwise would
have been declined.
• Enhanced decisioning for thin file, subprime, and near prime
consumers.
• Better identify risk among prime segment.
• Establish terms based on a more complete picture of a
consumers borrowing history.
• Enrich batch prospecting decisioning criteria to identify better
qualified prospects.
• Suppress high-risk consumers.
• Identify consumers more likely to respond.
• Utilize attributes in risk assessment to find additional
opportunities.
• Offer a more complete picture of consumer borrowing history.
• Trades can signal financial distress as consumers look for
emergency capital.
• Proactively manage credit lines.
• Reduce exposure to consumers showing increased risk and
signs of financial distress.
• Grow relationships by offering additional credit to consumers
seeking debt consolidation.
• Use data for risk swap set by identifying consumers that are
rebuilding credit with specialty finance trades and those that are
exhibiting high risk in alternative lending.
• Rich, varied non-traditional sources combined with traditional
information provides an unparalleled view of the consumer.
Prospecting Underwriting
Account Review Collections

29. ©Experian29
There is additional
data available
beyond traditional
credit bureau
information to make
more informed
lending decisions
Key Take Aways
1 2 3
Clarity Services is
the largest Alternative
Financial Services
(AFS) data asset in
the market 2X the
size of other AFS
data assets in
the market
If your organization is
not using all of the
information available to
assess a consumers
credit worthiness you
are missing important
insight into consumer
performance