FinTech Lending to Borrowers with No Credit History
Working Paper 33208
DOI 10.3386/w33208
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Despite the promise of FinTech lending to expand access to credit to populations without a formal credit history, FinTech lenders primarily lend to applicants with a formal credit history and rely on conventional credit bureau scores as an input to their algorithms. Using data from a large FinTech lender in Mexico, we show that alternative data from digital transactions through a delivery app are effective at predicting creditworthiness for borrowers with no credit history. Using account-by-month level data on revenues and costs, a machine learning model predicting profitability generates less profits than a model predicting default.