Startups analyse phone usage to determine credit-worthiness
In 2015, a small number of Silicon Valley start-ups began experimenting with assessing prospective borrowers in developing countries such as Kenya by inspecting their smartphones. Doing so, they claimed, enabled them to charge less in interest than more traditional microlenders, since many of their target customers lack traditional credit ratings. The amount of data on phones - GPS coordinates, texts, emails, app data, and more obscure details such as how often the user recharges the battery, how far they travel every day, and whether they include last names in their contact lists - correlate with their credit-worthiness. The start-ups included Bench.co, which offered an Android loan application app; Saida, funded by Y Combinator; Lenddo, which determined credit-worthiness by analysing social networks like Facebook and was backed by the Omidyar Network; and. InVenture, which found that known gamblers and users who waited until 10pm to make calls, when rates are lower, were both lower-risk borrowers. A similar strategy was being adopted by other companies such as Affirm, LendUP, and ZestFinance, who used data from sources such as social media, online behaviour, and data brokers to assess the credit-worthiness of low-income Americans. The strategy was beginning to spread to larger companies such as Visa and Alibaba.
Writer: Elizabeth Dwoskin
Publication: Wall Street Journal