As digital finance expands across Africa, the systems used to assess credit risk are changing. Traditional credit records are no longer the only sources of information lenders rely on; they’re turning to “alternative data” — information outside formal credit files that also reveal how consumers manage money.
For companies operating in the credit ecosystem, this shift is becoming essential, as millions across the continent remain outside formal channels.
TransUnion Africa CEO Lee Naik says the concept of alternative data is often misunderstood. “When we talk about it in South Africa, we’re referring to complete, accurate, consented behavioural data that sits outside the regulated credit reporting framework.”
Traditional credit information is defined under the National Credit Act and reported through formal credit bureau systems. But large parts of consumer behaviour are never reflected there.
In Africa, valuable data comes from phone use: how often people recharge airtime, how long they’ve had their SIM card and how steady their use of the card has been. Cash flow from banks, mobile money apps and digital wallets is also important. “It reveals real income patterns and spending habits that official records often miss,” Naik says. “These signals give us a more rounded view of consumer stability and help us score thin file consumers or those who are new to credit responsibly, without compromising governance or fairness.”
Across Africa, many consumers have little or no traditional credit history. This makes it difficult for lenders to assess risk using conventional scoring models. Naik says the most useful alternative data sources are those that reflect consistent financial behaviour.
Cash-flow information drawn from bank transactions, digital wallets and mobile money platforms is also increasingly important. “It shows genuine income rhythms and spending patterns in a way traditional bureau data often can’t,” says Naik.
Valuable data comes from phone use: how often people recharge airtime ... and how steady their use of the card has been
— Lee Naik
Data sources are not all equally reliable. Naik says some technology experiments in the sector are overhyped. “Where the industry tends to oversell is with social or nonfinancial signals — for example, social media footprints, sentiment models and any data set that isn’t explainable, auditable or tied to real economic behaviour. These can look interesting in a test environment, but they don’t stand up in regulated decision-making.”
When properly governed, alternative data can expand access to credit without increasing risk.
At the same time, lenders are navigating growing financial stress among consumers. Naik says the earliest signs of financial strain often appear before borrowers fall into formal arrears.
“The earliest signals don’t appear in traditional arrears; they show up in cash-flow and debit-order behaviour — skips, partial payments and recycling — weeks before delinquency becomes visible in bureau data.”
Naik says financial pressure is spreading beyond the lowest-income groups. “Middle-income consumers are drawing down savings buffers, relying more on overdrafts and reshuffling payments across both formal and informal obligations.”
New credit products complicate the picture. Buy-now-pay-later services, for example, are not always reflected in traditional credit records.
Alongside providing new data tools, the industry is confronting a sharp rise in digital fraud. Naik says many fraud schemes start with stolen identities. “Data breaches and inconsistent digital ID systems make it easier for criminals to impersonate consumers or create synthetic identities.”
AI is making these attacks seem more believable. “AI-driven fake documents and deep-fake selfies are becoming far more convincing, leading to a sharp rise in biometric spoofing,” Naik says.
Mobile banking channels have become key targets. “Because so much lending and payment activity now happens through mobile channels, account takeovers and SIM swap attacks continue to grow.”
TransUnion started its first alternative data scorecard in 2018, and the performance uplift continues today.
Lebogang Thobakgale of KPMG South Africa links it to other crime trends: “Financial fraud has exploded, fuelled by tech such as cyber tools. And identity theft opens the door to everything else,” Thobakgale says. Underground markets sell easy “fraud kits”, and AI crafts perfect phishing e-mails or deepfakes that are tough to spot.
Banks are racing to catch up, but weak national ID systems are the real weak spot. “Africa’s fraud problem is more about broken IDs than about bad banks,” Naik says. A good system needs everyone to be covered, strong privacy laws to be in place, links to exist between services (online and off) and the public to have trust so that people feel safe sharing data.
Collaboration is essential. Agencies such as the South African Banking Risk Information Centre, the Financial Intelligence Centre and regulators now share information to fight organised crime.
Naik predicts “open finance” for the future — secure data sharing between banks, apps, phone companies and ID systems, always with permission. “If Africa nails this trusted setup, we will get fairer, more open credit for everyone.”
Fraud expert Amritha Reddy sums it up: “It’s about protecting people and building trust. By teaming up against threats, we create strong, reliable money systems for our communities. By staying ahead of evolving threats and working collectively across the industry, we not only reduce harm but advance a shared purpose: building a financial ecosystem rooted in trust, resilience and the wellbeing of our communities.”
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