Opportunities in Alternative Data

Opportunities in Alternative Data

Financial service providers have always relied heavily on data and technology for business operations, critical decision-making, and maintaining competitiveness. Data forms the backbone of their core functions and the basis for market research, user experience improvement, new product development, and more.

Gaining an information advantage helps financial service providers stay competitive in saturated markets while staying relevant to their customers’ changing needs. Traditional sources of information have been utilized to their fullest with added layers of intelligence to achieve an information advantage for financial service providers.

However, there is a set of information growing increasingly popular among financial institutions owing to its extensive scope and high relevance in today’s world- alternative data.

Alternative data, simply put, is information from non-traditional sources such as e-commerce platforms, payment partners, digital wallets, accounting systems, geolocation apps, websites, and social media. Financial institutions are utilizing such data independently or as a value-addition to their existing conventional data to gain a market edge and derive actionable insights to grow business.

How is Alternative Data Helping Financial Service Providers?

Financial service providers are embracing alternative data sources for various purposes, such as risk assessment, revenue forecasting, portfolio health checks, demand forecasting, and new product development.

The information advantage offered by alternative data sources proves to be highly beneficial to financial service providers in helping them optimize their product and service offerings and in building new products to suit their customers’ changing needs. Here are a few ways in which alternative data is helping financial service providers optimize and improve the way they do business:

Alternative data is helping financial institutions conduct a more accurate risk analysis of loan applications, even for applicants considered non-eligible for loans from traditional banks due to a ‘thin file.

As per a lender survey on alternative credit data, 65% of lenders said they had used additional information outside of the traditional credit report to make smarter lending decisions. Transaction data, telco data, payments data, e-commerce data, and more can help lenders assess the borrower’s creditworthiness and the business’s performance and viability in the case of SME loans.

Fraud detection

Online frauds have become much more common, sophisticated, and difficult to detect owing to the rapid digitalization that most financial institutions are trying to keep up with. However, close observation and alternative data analysis can help spot discrepancies and flag possible fraudulent incidents. For example, data values, such as invoice values from two systems- accounting system and e-commerce data, can be validated to identify discrepancies indicating forged values or fraudulent transactions. Alternative data analysis can help with the early detection of fraud and identify areas of investigation that can help financial institutions minimize the losses associated with such fraud.

Demand forecasting

Alternative data can help financial institutions with comprehensive insights to understand and forecast the small business demands to prepare for the same as a supplier. Insights gained from alternative data sources such as transaction, payment, and sales data can help understand the consumer demand for a business and, in turn, help anticipate a change in the market for the small business as a customer.

New product development

For financial institutions, new product development is the key to gaining a market edge and maintaining relevance with customers by catering to their dynamic needs and demands. On a macro level, alternative data can provide insights into the industry and category trends to help identify upcoming growth areas and market opportunities for introducing new products. For the existing customer base, analysis of alternative data can help identify gaps and changing needs that enable financial institutions to customize or update their products to serve their customers better.

Enhanced customer experience

Alternative data enables financial institutions to build better products that are more relevant to their customers’ dynamic needs, enhancing their experience with the service providers. Utilizing alternative data via APIs has also helped financial institutions automate manual processes, quicker decision-making, expand their reach, customize their offerings, and improve the overall customer experience with them.

As an example, leveraging alternative data for lending has benefitted financial institutions with quicker turnaround times, more accurate risk assessment, holistic view of SME business health, extended reach to serve the unbanked/underbanked, higher approval ratios and development of customized offerings for customers; all of which in turn add to an enhanced customer experience for their borrowers.


Alternative data has been growing increasingly popular among financial institutions owing to its growing number of use cases and the value of information and insights it provides.

The global alternative data market size is expected to expand at a compound annual growth rate of 54.4% from 2022 to 2030, with BFSI (Banking, Financial Services, and Insurance) being a significant driver for the market. While alternative data has made its way into supporting most functions and offerings of financial institutions, there still needs to be a significant unutilized potential for it. Alternative data providers are going beyond providing access to non-conventional data from multiple sources and working towards offering data intelligence to help enhance the value and benefits of such data for financial institutions.

Similarly, at Oystr Finance, our unified APIs help our clients gain seamless access to structured alternative data from multiple data points with an added intelligence layer to help them gain valuable insights from such data.

To know more about how your business can scale up with alternative data, get in touch or simply book a demo with our team