A think tank is normally associated with academic institutions or consultancy firms, but one financial technology company is doing its own research to stimulate debate about credit inequality while boosting its brand at the same time.
Elevate Credit, an online lender, offers small-scale (between $500 and $3,000) loans to non-prime borrowers, or people who have credit scores lower than 700. Elevate, which went public last month, decided to take the research it does on its target market and publish it publicly through its in-house think tank, the Center for the New Middle Class. The research is published on the Center’s website and its findings have been fodder for stories in mainstream media outlets, including Business Insider and Bloomberg.
“We get reams of data to understand the best way to underwrite a customer but what we needed to do is humanize the data,” said the Center’s executive director, Jonathan Walker. “We needed to find a way to understand the stories behind the data to help better identify the products and services that are necessary.”
Beyond traditional credit scores, Elevate Credit looks at data including transactional history and utility bills to offer credit to people who otherwise would be overlooked by the banks. Walker said Elevate set up the Center in October after discovering that its typical customer doesn’t fit the stereotype.
“What’s really driving people into the non-prime space is out of their control — it’s often because of job losses or unexpected expenses like medical bills,” Walker said. “Too many people talk about the non-prime consumer as being lazy or careless or just uneducated, and the reality is far from that.”
The Center is located in Elevate’s corporate offices in Fort Worth and employs five Elevate employees who crunch the data on a part-time basis. The team comes from backgrounds such as market research, data analytics and sociology. Elevate uses data from surveys and focus groups it organizes and insights from its 100,000-plus customers. The Center’s output often takes the form of reports focusing on how the target population manages money. For example, based on a survey of 600 non-prime Americans, Elevate did a study that looked at how they handle emergency expenses. Another study looked at how often non-prime populations keep watch over their transaction history and credit scores.
Walker said what motivated Elevate to create the Center was the lack of research on credit inequality, with most studies focusing on income inequality. Since not all non-prime borrowers are poor, conclusions from income inequality research aren’t always applicable to those who can’t access credit.
“If you apply an income inequality solution to a credit inequality problem you don’t solve the problem at all,” he said.
As the research arm of a business with a stake in the findings, some may question the objectivity of the conclusions, but Walker said the company wants the Center’s content to stimulate debate about policy issues — a move that ultimately boosts the brand.
“What we hope is that the Center content is engaging thought leaders, whether it be academics, journalists and policy makers, and we also are hoping to get a broader audience of people who are interested.”