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What do grocery data (how, when, and what you buy) and traditional credit scores have in common? According to research by Professor Eric Anderson and his colleagues at Northwestern University - Kellogg School of Management, they both effectively predict how consistently you’ll pay off your credit card bills, making it an interesting alternative for lenders to gauge the creditworthiness of applicants who have no credit score. This could bring new customers to banks and improve access to credit for the 26 million in the US (and more than a billion globally) who are “unbanked.” Some findings: - People with consistent supermarket behaviors tend to pay their credit cards on time: They shop at regular times of the day and weekdays. They make repeat purchases. They spend about the same amount of money each time and look for bargains. Even controlling for credit scores, income, and socio-demographic factors, there was a correlation between grocery habits and credit risk. - It’s not just about how you shop but what you buy: Cigarette purchases are a big predictor someone will default (i.e., miss two consecutive credit card payments), as are those of highly processed foods and energy drinks. “The single greatest indicator of a non-defaulter. . . was spending a significant amount on vinegar salad dressing,” as well as ingredients that suggest healthier eating and home cooking, such as milk, flour, beans, and fresh produce. - Grocery data is most effective in determining the creditworthiness of credit card applicants who don’t yet have credit scores, but less effective in incrementally assessing those who already do. Similarly, the data is most helpful at predicting whether someone will default soon after they get a credit card; less useful once they begin to build a credit score. “‘That’s the world we’re heading towards, which is your data is going to be cutting across lots of different domains and being used in ways you may not have thought before,’ Anderson says.” On the one hand, it could provide access to a loan in the case of an emergency to those who might not otherwise be able to get one, and it can help lenders anticipate a default and intervene in advance, which is better for everyone. “Still, . . . the idea that the choices you make while filling up your grocery cart could impact other parts of your life in ways you don’t understand, or consent to, may sit uneasily with many.” #credit #data #shopping #shoppers #consistency #habits #creditrisk #supermarket #insights
Dan Smolen
2mo
That's fascinating that grocer basket analysis highly correlates to paying off statements on time. (Oh, and that's me. )
Tom Lanktree
2mo
This is an absolutely fascinating use of data even though it would be even better to have a comparison to how the estimated credit worthiness of those tested would have fared vs an in-person assessment. In the days when cigarette smoking was popular, there was probably a preponderance of timely payers. It is also worth thinking about how this relates to marijuana users since it’s one weed that can’t yet be bought at grocery stores.
Fascinating correlations between grocery data and credit scores.... I find it meaningful in terms of understanding people's behaviors and how they impact their relationships with brands and simultaneously frightening as a person concerned about cross-tracking aspects of increasingly sophisticated data collection and monitoring.
I find it interesting how research crosses data from other patterns into credit card payments... It may be accurate for most cases, but I guess some people are not that regular in terms of grocery shopping... especially if they have to travel frequently.
Randye S S.
2mo
What an interesting correlation. How do they intend to collect this data for those who are unbanked?
Jillian Reilly
2mo
Our lives are an accumulation of choices. I suppose it’s not surprising that for better or worse we’ll be judged by those choices by companies looking for your most desirable clients and customers.
Fascinating research! The link between grocery shopping habits and credit reliability opens new avenues for financial inclusion. Thanks for sharing!
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2moThis is reminiscent of the old saying, “You are what you eat.”