Alternative credit on the docket for discussion at World Economic Forum
For more than 40 years, the World Economic Forum has brought together nations' leaders, Fortune 500 CEOs, innovators across multiple industries and various others for annual discussions of the macroeconomic forces and tangential elements affecting the globe. This past week - beginning Jan. 23 and continuing through the end of the day Jan. 26 - all of the biggest issues shaping the various directions of the worldwide economy have been on the docket for discussion, and the value of investment in alternative credit has been included among these.
"Alternative credit will find its way into various conversations at the latest World Economic Forum."
It remains to be seen whether the Davos, Switzerland-based conference will lead to any broader changes in how the mainstream financial world views alternative credit data and nontraditional lending. Many high-echelon Davos participants represent banks, investment groups, hedge funds and other well-known financial institutions, and organizations like those haven't all been quick to move away from the status quo. Nevertheless, making it into the broader conversation can only be seen as a positive by proponents of alternative credit.
Trade associations identify strength of nonbank lending
According to Institutional Investor, research from the Alternative Investment Management Association places hard data behind sales pitches (so to speak) of alternative credit. The Alternative Credit Council, which serves the AIMA as its private credit organization, found that since the chaotic beginning of the global financial crisis in 2008, nonbank lending has only increased in appeal around the world, and shows few signs of stopping. By 2020, it may account for as much as $1 trillion in managed assets.
What this makes clear is that whether traditional banks support it or not, there has been a clear interest in the pursuit of lending outside the norm on the part of consumers. They know that loan requests won't be denied based on the incomplete portrait provided by a FICO or Vantage credit score by most alternative lenders. This makes loans a more viable option for the growing population of Americans who have reasonable income but imperfect credit.
Broad policy changes could benefit businesses
The recent changes to U.S. tax code facilitated by the reform bill passed by Congress and signed into law by President Donald Trump are receiving a great deal of attention at the Davos conference, according to CNNMoney. Multiple CEOs of multinational corporations stated unequivocally that the law's cut in the corporate tax rate, from 37 to 21 percent, will inspire greater investment in doing business within the U.S.
On a smaller scale, these cuts may ultimately help smaller businesses and banks as well. For example, they may afford companies greater flexibility to offer financing options to consumers that weren't feasible before, broadening their customer bases and positively benefiting the bottom line.