Consumer credit has been constantly evolving for more than 5,000 years, but the reality is that the most drastic changes to the industry came fairly recently.
Modern credit systems are now powered by sophisticated algorithmic credit scoring, the use of trended and alternative data, and innovative fintech applications. While these developments are all interesting in their own right, together they serve as a technological foundation for a much more profound shift in consumer credit in the coming years.
The Future of Consumer Credit
In today’s infographic from Equifax, we look at the cutting edge of consumer credit, including the new technologies and global trends that are shaping the future of how consumers around the world will access credit.
It’s the final piece of our three-part series covering the past, present, and future of credit.
The biggest problem that creditors have always faced is well-documented. There is more to a borrower than just their credit score. Yet creditors do not always have a 360 degree view of a consumer’s creditworthiness in order to better assess their overall score.
Called “information asymmetry”, this gap has gotten smaller over the years thanks to advancements in technology and business practices. However, it still persists in particular situations, like when a college student has no credit history, or when a rural farmer in India wants to take out a loan to buy seeds for crops.
But thanks to growing amounts of data – as well as the technology to make use of that data – high levels of information asymmetry may soon be a thing of the past.
Forces Shaping Credit’s Future
Here are some of the major forces that will drive the future of consumer credit, addressing the information asymmetry problem and making a wide variety of credit products available to the public:
1. Growing Data
90% of the data in all of human history has been created in just the last two years.
2. Changing Regulatory Landscape
New international regulations are putting personal data back in the hands of consumers, who can control the personal data they authorize access to.
3. Game-changing Technologies
Machine learning, deep learning, and neural networks are giving companies a way to garner insights from data.
4. Focus on Identity
Authenticating the identity of consumers will become crucial as credit becomes increasingly digital. Blockchain and biometrics could play a role.
5. The Fintech Boom
The democratization of data and tech is allowing small and niche players to come in and offer new, innovative products to consumers.
The Credit Revolution
No one can predict the future, but the above forces are shaping the credit industry to be a very different experience for consumers and businesses. Here are how things could change.
More Data, New Models
Current credit scoring algorithms use logistical regressions to compute scores, but these really max out at using 30-50 variables. In addition, these models can’t “learn” new things like AI can.
However, with new technologies and an unprecedented explosion in data taking place, it means that this noise can be converted into insights that could help increase trust in the credit marketplace. New algorithms will be multivariate, and they will be able to mine, structure, weight, and use this treasure trove of data.
|Artificial intelligence||Machine learning can “learn” from massive data sets, and apply these lessons for better scoring.|
|Bayesian||Models can update probabilities as more information is available, helping to better predict creditworthiness.|
|APIs||Application programming interfaces (APIs) make it easier for developers to use technologies, data, and to build new applications.|
|Neural networks||Brain-inspired AI systems designed to replicate the way that humans learn are used for deep learning. This enables the processing of raw, unstructured, and often abstract data for new insights.|
Neural networks will be able to look at a billions of data points to find and make sense of extremely rare patterns. They will also be able to explain why a particular decision was made – and at a time where transparency is crucial, this will be key.
Data Will be in the Hands of Consumers
Today, much of consumers’ financial data – such as loan repayment histories – is held almost exclusively by banks and credit agencies.
However, tomorrow points to a very different paradigm: much of the data will be directly in the hands of consumers. In other words, consumers will be able to decide how their data gets used, and for what. In Europe, changes have already been made to transfer control of personal data to the consumer, such as the PSD2, GDPR, and Open Banking (U.K.) initiatives.
Experts see the trend towards open data growing globally, and eventually reaching the United States. Open data will allow consumers to:
- Regain control of checking, mortgage, loan, and credit card data
- Give up more information voluntarily to unlock better deals from creditors
- Grant access to third parties (fintech, apps, etc.) to use this data in new applications and products
- Gain access to better rates, new lending models, and more
Identity Will Be Just as Important
As transactions become more digital and remote, how lenders verify the identity of borrowers will be just as important as the lending data itself.
Why? Credit is based around trust – and fraud is the biggest risk for lenders.
But fraud an be prevented by new technologies that help detect anomalies and prove a borrower’s identity:
Distributed, tamper-resistant databases can help secure people’s identities from fraudulent activity
Fingerprints, facial recognition, and other biometric identification schemes could help secure identities as well
New Game, New Players
With the vast expansion in types and volume credit data, new technologies, and standardized data in the hands of consumers, there will be a new era of third-party companies and apps that can provide useful and relevant services for consumers.
Here are just some emerging fields in lending:
|P2P Loans||Does a bank need to be an intermediary?
With peer-to-peer loans, you are matched to an appropriate lender/borrower.
|Microlending||Lending doesn’t always need to be in big amounts, like for a mortgage or auto loan.|
|Alternative credit scoring||Psychometric testing or the use of other data streams can be used to power this less traditional form of lending.|
|Niche services||With an open playing field, companies will fill every gap imaginable.|
In the future, consumers may not have to even request credit – it may be automatically allocated to them based on behavior, age, assets, and needs.
Consumers will have more control, and more options than ever before.
How Big Tech Makes Their Billions
The big five tech companies generate almost $900 billion in revenues combined, more than the GDP of four of the G20 nations. Here’s how they earn it all.
How Big Tech Makes Their Billions
The world’s largest companies are all in technology, and four out of five of those “Big Tech” companies have grown to trillion-dollar market capitalizations.
Despite their similarities, each of the five technology companies (Amazon, Apple, Facebook, Microsoft, and Alphabet) have very different cashflow breakdowns and growth trajectories. Some have a diversified mix of applications and cloud services, products, and data accumulation, while others have a more singular focus.
But through growth in almost all segments, Big Tech has eclipsed Big Oil and other major industry groups to comprise the most valuable publicly-traded companies in the world. By continuing to grow, these companies have strengthened the financial position of their billionaire founders and led the tech-heavy NASDAQ to new record highs.
Unfortunately, with growth comes difficulty. Data-use, diversity, and treatment of workers have all become hot-button issues on a global scale, putting Big Tech on the defensive with advertisers and governments alike.
Still, even this hasn’t stopped the tech giants from (almost) all posting massive revenue growth.
Revenues for Big Tech Keep Increasing
Across the board, greater technological adoption is the biggest driver of increased revenues.
Amazon earned the most in total revenue compared with last year’s figures, with leaps in almost all of the company’s operations. Revenue from online sales and third-party seller services increased by almost $30 billion, while Amazon Web Services and Amazon Prime saw increased revenues of $15 billion combined.
The only chunk of the Amazon pie that didn’t increase were physical store sales, which have stagnated after previously being the fastest growing segment.
Big Tech Revenues (2019 vs. 2018)
|Company||Revenue (2018)||Revenue (2019)||Growth (YoY)|
|Apple||$265.6 billion||$260.2 billion||-2.03%|
|Amazon||$232.9 billion||$280.5 billion||20.44%|
|Alphabet||$136.8 billion||$161.9 billion||18.35%|
|Microsoft||$110.4 billion||$125.8 billion||13.95%|
|$55.8 billion||$70.8 billion||26.88%|
|Combined||$801.5 billion||$899.2 billion||12.19%|
Services and ads drove increased revenues for the rest of Big Tech as well. Alphabet’s ad revenue from Google properties and networks increased by $20 billion. Meanwhile, Google Cloud has seen continued adoption and grown into its own $8.9 billion segment.
For Microsoft, growth in cloud computing and services led to stronger revenue in almost all segments. Most interestingly, growth for Azure services outpaced that of Office and Windows to become the company’s largest share of revenue.
And greater adoption of services and ad integration were a big boost for ad-driven Facebook. Largely due to continued increases in average revenue per user, Facebook generated an additional $20 billion in revenue.
Comparing the Tech Giants
The one company that didn’t post massive revenue increases was Apple, though it did see gains in some revenue segments.
iPhone revenue, still the cornerstone of the business, dropped by almost $25 billion. That offset an almost $10 billion increase in revenue from services and about $3 billion from iPad sales.
However, with net income of $55.2 billion, Apple leads Big Tech in both net income and market capitalization.
Big Tech: The Full Picture
|Company||Revenue (2019)||Net Income (2019)||Market Cap (July 2020)|
|Apple||$260.2 billion||$55.2 billion||$1.58 trillion|
|Amazon||$280.5 billion||$11.6 billion||$1.44 trillion|
|Alphabet||$161.9 billion||$34.3 billion||$1.02 trillion|
|Microsoft||$125.8 billion||$39.2 billion||$1.56 trillion|
|$70.8 billion||$18.5 billion||$665.04 billion|
|Combined||$899.2 billion||$158.8 billion||$6.24 trillion|
Bigger Than Countries
They might have different revenue streams and margins, but together the tech giants have grown from Silicon Valley upstarts to global forces.
The tech giants combined for almost $900 billion in revenues in 2019, greater than the GDP of four of the G20 nations. By comparison, Big Tech’s earnings would make it the #18 largest country by GDP, ahead of Saudi Arabia and just behind the Netherlands.
Big Tech earns billions by capitalizing on their platforms and growing user databases. Through increased growth and adoption of software, cloud computing, and ad proliferation, those billions should continue to increase.
As technology use has increased in 2020, and is only forecast to continue growing, how much more will Big Tech be able to earn in the future?
What Does 1GB of Mobile Data Cost in Every Country?
Globally, the cost of mobile data ranges between $0.09 per GB up to $27 per GB. Here’s how it breaks down in 150+ countries.
What Does 1GB of Mobile Data Cost in Every Country?
Billions of people around the world rely on their mobile phones every day.
Even in a saturated market, mobile networks have continued to expand their reach. In the last five years alone, almost one billion additional people have gained access to mobile data services.
Despite the growing prevalence of these networks worldwide, the cost of gaining access can vary greatly from country to country—particularly when it comes to the price of mobile data.
Today’s chart uses figures from Cable.co.uk to showcase the average cost of one gigabyte (GB) of mobile data in 155 different countries and jurisdictions. Despite the vast global reach of the mobile economy, it’s clear it still has a long way to go to reach true accessibility.
Discrepancies in Mobile Data Costs
Researchers have identified several key elements that help explain the cost variation for mobile data between countries:
- Existing infrastructure (or lack thereof): This might seem counterintuitive, but most mobile networks rely on a fixed-line connection. As a result, countries with existing infrastructure are able to offer mobile plans with more data, at a cheaper price. This is the case for India and Italy. Countries with minimal or no infrastructure rely on more costly connection alternatives like satellites, and the cost typically gets passed down to the consumer.
- Reliance on mobile data: When mobile data is the primary source of internet in a particular region, adoption can become nearly universal. This high demand typically leads to an increase in competing providers, which in turn lowers the cost. Kyrgyzstan is a good example of this.
- Low data consumption: Countries with poor infrastructure tend to use less data. With mobile plans that offer smaller data limits, the overall average cost per GB tends to skew higher. Countries like Malawi and Benin are examples of this phenomenon.
- Average income of consumer: Relatively wealthy nations tend to charge more for mobile services since the population can generally afford to pay more, and the cost of operating a network is higher. This is apparent in countries like Canada or Germany.
The Cheapest Countries for 1 GB of Data
Even among the cheapest countries for mobile data, the cost variation is significant. Here’s a look at the top five cheapest countries for 1 GB of data:
|Overall Rank||Country||Average price of 1GB (USD)|
India ranks the cheapest at $0.09 per GB, a 65% decrease in price compared to the country’s average cost in 2019.
Why is data so cheap in India? A significant factor is the country’s intense market competition, driven by Reliance Jio—a telecom company owned by Reliance Industries, one of the largest conglomerates in India. Reliance Jio launched in 2016, offering customers free trial periods and plans for less than a $1 a month. This forced other providers to drop their pricing, driving down the overall cost of data in the region.
Because these prices are likely unsustainable for the long term, India’s cheaper-than-usual prices may soon come to an end.
Another country worth highlighting is Kyrgyzstan, which ranks as the third cheapest at $0.21 per GB, ahead of Italy and Ukraine. This ranking is surprising, given the country’s minimal fixed-line infrastructure and large rural population. Researchers suspect the low cost is a result of Kyrgyzstan’s heavy reliance on mobile data as the population’s primary source of internet.
The Most Expensive Countries for 1 GB of Data
On the other end of the spectrum, here are the top five most expensive countries for one gigabyte of mobile data:
|Overall Rank||Country||Average price of 1GB (USD)|
A striking trend worth noting is that four out of five of the most expensive countries for mobile data are in Sub-Saharan Africa (SSA).
A significant factor behind the high cost of data in SSA is its lack of infrastructure. With overburdened networks, the data bundles offered in the region are generally smaller. This drives up the average cost per GB when compared to countries with unlimited packages.
Another element that contributes to SSA’s high costs is its lack of market competition. In countries with multiple competing networks, such as Nigeria, the cost of data skews lower.
The Full Breakdown
The below table has a full list of all 155 countries and jurisdictions included in the data set. It helps demonstrate the stark contrast in the cost of mobile data between the most expensive and cheapest countries globally.
|Rank||Country||Average price of 1GB (USD)|
|92||Bosnia and Herzegovina||$3.04|
|103||United Arab Emirates||$3.78|
|131||Papua New Guinea||$5.40|
|133||Trinidad and Tobago||$5.92|
|139||Central African Republic||$8.25|
Interestingly, the highest average cost is 30,000% more than the cheapest average price.
The Technology Gap
Will we reach a point of equal accessibility across the globe, or will the technology gap between countries continue to widen?
With 5G networks on the rise, just seven countries are expected to make up the majority of 5G related investments. Time will tell what this means for adoption worldwide.
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