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About the Author:
Terry Kiwala
Vice President
Terry Kiwala has worked in finance and investment for more than two decades and joined First Analysis in 2019. He works with entrepreneurs as an investor and as an advisor on growth transactions to help build leading enterprise productivity software businesses. He is a thought leader in his sector, having authored widely read industry research. He supports First Analysis' investments in Drive My Way, Insellerate, Lender Price, PCMI, SmartCommerce and Visage. Prior to joining First Analysis, he was chief financial officer of Vokal, a software development company, senior vice president at Tribeca Flashpoint Media Arts Academy, and associate vice president at National-Louis University. Earlier, he was an investment banking analyst at Lehman Brothers. He earned a bachelor’s degree in economics and government from the University of Notre Dame. He is a CFA charterholder.
First Analysis Enterprise Productivity Technology Team
Terry Kiwala
Vice President
Corey Greendale
Managing Director
Richard Conklin
Managing Director
Matthew Nicklin
Managing Director
First Analysis White Paper
Enterprise productivity
Technology for alternative consumer credit scoring will be a large and fast-growing market
March 16, 2023
  • Traditional consumer metrics, most notably FICO scores, are becoming inadequate as a basis for deciding whether to extend consumer credit. Lenders and other stakeholders increasingly understand this and are seeking ways to assess consumer creditworthiness more accurately.
  • A wide range of alternative consumer metrics, including data from bank account statements, rent payment records and utility bill payment records, provide information that addresses this need, but for much of the history of consumer credit, it was impractical to use this type of data due to the cost and logistical challenges of collecting and analyzing it. In today's increasingly connected and digitized financial ecosystem, these barriers are shrinking, and innovative companies are using technology to offer consumer lenders credit analysis and decision tools based on these alternative metrics.
  • Given the large size of the market for traditional consumer credit metrics (we estimate at least $5.6 billion annually) and the compelling value these tools can provide for consumer lenders, we think companies that provide these tools can grow quickly and achieve substantial scale as they displace the use of traditional consumer credit metrics and enable lenders to tap new consumer segments where they previously lacked sufficient information to make credit decisions.
  • We think there is ample room for multiple winners and profile several companies leading this emerging segment.


Another frontier for nontraditional credit data

Traditional consumer credit scores are becoming inadequate

Technology that enables the use of alternative data will fuel the switch away from FICO

Companies that enable using alternative credit data address a large and growing market

Opportunity for multiple winners

Company profiles

Another frontier for nontraditional credit data

In our August 2020 white paper on lending as a service, we detailed commercial lenders' increasing use of nontraditional credit metrics to underwrite decisions to extend credit to small and medium-size businesses. Since then, we've continued to research the use of nontraditional credit metrics in a variety of lending markets. In this report, we examine the growing market for nontraditional credit metrics in the consumer lending market.

We expect adoption of alternative metrics to increase in velocity, particularly as a recent endorsement by Freddie Mac drives more lenders to use these metrics and as lenders migrate their usage into their own balance sheet products. Key to widespread adoption will be demonstrating reliability, cost savings, improved loan portfolio performance, and overall consumer benefits. Given the large potential market for alternative consumer credit metrics, we expect other companies to enter beyond the existing players, a number of which we profile in this report. We believe those platforms that integrate with chartered banks quickly and accurately will gain market share and command pricing power as more lenders migrate away from traditional metrics such as FICO scores and find alternative metrics for credit qualification to be compelling tools that benefit loan performance and pricing.

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