Big Data, Small Credit: The Digital Revolution and Its Impact on Emerging Market Consumers

ment are poised to deliver huge impact by bringing formal, accessible, and affordable credit to hundreds of millions of aspiring middle-class consumers in emerging markets. At the forefront of this change is a burgeoning new field that we’re calling “Big Data, Small Credit” (BDSC). Around the world, many emerging-market consumers remain severely limited in their access to formal financial services, particularly unsecured credit. In India alone, in 2014, more than 400 million people borrowed money—but fewer than one in seven were approved for a formal loan.1 Indeed, this experience of being “invisible” to formal lenders is prevalent among billions of “thin file” or “no file” consumers living in nearly all of today’s emerging markets. But these consumers may not remain “invisible” to formal lenders for long, thanks in part to their rising use of technology. Well over 650 million adults in India—four out of every five—already have a mobile phone in their pocket, and most of these will be smartphones by 2020. More than 240 million Indians have access to the Internet and social media.2 Seven in 10 users of mobile broadband smartphone in India regularly stream videos on their phones; six in 10 use social networks.3 And every time these individuals make a phone call, send a text, browse the Internet, engage social media networks, or top up their prepaid cards, they deepen the digital footprints they are leaving behind. These digital footprints are helping to spark a new kind of revolution in lending. In the last few years, a cluster of fast-emerging and innovative firms has begun