Publication: The Use of Alternative Data in Credit Risk Assessment: Opportunities, Risks, and Challenges
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2025-03-18
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2025-03-18
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Digitalization accelerated by the pandemic has exponentially increased the number and variability of alternative data sources. The stay-at-home requirements during the pandemic forced several business models to be digitized. This helped spur the digitization that had been ongoing pre-pandemic, largely driven by governments as countries sought to leverage the benefits of the digital economy. Advances in technological innovations are also facilitating the development of advanced credit underwriting models and the use of structured and unstructured data to assess creditworthiness. This has enabled the financial industry to actively integrate alternative data to gain a competitive edge. This study examines the evolution of the use of alternative data in creditworthiness assessment since the ICCR issued its Policy Guidance Note in 2018. The report identifies the use cases of alternative data in creditworthiness and the emerging models across geographical regions. After assessing the evolution of associated legal and regulatory frameworks, it concludes by offering recommendations and policy considerations. The findings of the study are detailed below.
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“World Bank. 2025. The Use of Alternative Data in Credit Risk Assessment: Opportunities, Risks, and Challenges. © World Bank. http://hdl.handle.net/10986/42970 License: CC BY-NC 3.0 IGO.”
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