|Image credit: Peter Grundy|
Market Watch: How artificial intelligence could replace credit scores and reshape how we get loans
Alternative credit scores — using data, in part, from customers’ smartphones — will be migrating from emerging economies to the U.S.
by Emily Bary
You may not think the number of words in an email subject line says anything about you, but at least one company is betting that the metric can help determine your likelihood of paying back a loan.
LenddoEFL, based in Singapore, is one of a handful of startups using alternative data points for credit scoring. Those companies review behavioral traits and smartphone habits to build models of creditworthiness for consumers in emerging markets, where standard credit reporting barely exists.
In addition to analyzing financial-transaction data, Lenddo’s algorithm takes into consideration things such as whether you avoid one-word subject lines (meaning you care about details) and regularly use financial apps on your smartphone (meaning you take your finances seriously). Lenddo also looks at the ratio of smartphone photos in your library that were taken with a front-facing camera, since selfies indicate youth, helping the company divide people into customer segments.
The data points are unconventional, but Darshan Shah, Lenddo’s managing director for South Asia, says the company’s overall algorithm is a reliable predictor of creditworthiness for the so-called underbanked. For those who lack formal credit histories, Lenddo and others say artificial intelligence can help sort through a variety of data points that, in sum, indicate financial responsibility.
For the full story, please visit https://www.marketwatch.com/story/ai-based-credit-scores-will-soon-give-one-billion-people-access-to-banking-services-2018-10-09