Alternative data

Alternative data is information collected from non-traditional sources and used to supplement or replace traditional data in contexts such as credit scoring, investment decisions, or market analysis. It helps decision-makers add context, fill gaps in standard datasets, and make better-informed decisions.

Example

Consider a small business owner, Jane, who applies for a loan to grow her business. Traditional credit scoring methods may not be enough to assess her creditworthiness, because her business is new and her credit history is limited. In this case, a lender can use alternative data such as Jane's utility bill payments, rental history, social media activity, or online sales data to evaluate her financial responsibility and risk profile more accurately. By including this data in the assessment, the lender can make a more informed decision about whether to approve Jane's loan application.