Startups use social network data to provide online credit services

According to foreign media reports, more and more startups use social networking sites such as Facebook, Twitter and LinkedIn to give users credit ratings, and then provide them with financial credit services. These companies ' assessment criteria include the number of users who are interested in social networking sites, the background of their followers, their education and career experience, and their friends ' credit histories.

At a congressional hearing in 1912, a lawyer asked John Pierpont Morgan, founder of John Pilpante Morgan JP Morgan, whether a person's money and assets were the most important factor in his ability to lend. Morgan replied: "No, sir, the first factor is character." ”

This is a quote often quoted by Jeff Stewart, co-founder of Lenddo, an online lending start-up company, Jeffer Stewart. Stewart is one of a growing number of entrepreneurs who believe that a reputation for the web can reflect a person's credibility more than a FICO score. FICO in Fair Isaac Company's promotion, has become America's most commonly used credit rating score.

FICO scores by paying history, amounts owed, and credit reports using credit card length. Lenddo and other similar sites use social networking data and other factors to find people who are struggling to get credit.

"Fico helped expand the financial business, but it failed to lend entirely on the basis of reputation and community status." "Facebook, Twitter and LinkedIn help finance get back to basics," says Stewart. ”

Lenddo, a Hong kong-based company, is offering small loans to users in Colombia and the Philippines for "better life" purposes such as education, health care and housing. But other companies are targeting more developed markets.

Neo Finance is a company headquartered in Paloaito, Calif. (Palo Alto), which provides car loans to American consumers based on their real income and social data. Neo Finance claims that it can save up to 50% of the interest costs for users, targeting young adults who have not yet formed a comprehensive credit history, but may become high-income groups in the future.

Naven Batja Navin Bathija, the company's CEO, said the company would also evaluate credit reports, but would not use FICO to assess risk. Instead, the company uses more time to analyze the user's LinkedIn data, determine the user's working hours, the number and quality of contacts in the industry, and the location and level of contact. "When you see this information, you have a sense of job stability," says Batja. ”

Another entrepreneur exploring the field is Max Lev (Max Levchin), former PayPal chief technology officer, Yelp and Yahoo board members. His start-up company, affirm, made payments to businesses ahead of time, making it easier for consumers to pay for smartphones.

In this way, consumers do not have to enter their own credit card information. Affirm will not charge any fees or interest, the user only in 30 days to return the money affirm can. To reduce the risk of fraud, affirm encourages users to bundle their accounts with Gmail or Facebook accounts, which allows affirm to determine the identity of the user. Affirm can scan a large amount of public data associated with that identity, and then compute the credit score for the affirm account. "These signals help us know if you are the person you call yourself," says Leo. ”

Affirm's algorithm comes from more than 100 databases and social networking sites that gather information based on a range of variables, such as the location of the user and the number of contacts. "We can't 100% guarantee that everyone will give us the money back," said Leo, "we'll lose some money and make adjustments." ”

At the same time, Lenddo gives users a credit rating of 1 to 1000 points based on their social networking information, such as education and career information, friends and friends information, the number of followers, and the length of time they receive Lenddo accounts. The company, founded in 2011, said that the company's loan algorithm had about 8500 changes, and that, in addition to collecting information, Lenddo also used users ' networks to force them to repay their loans. For example, if a user defaults on a loan, Lenddo can notify his friends that if the user refuses to repay, the Lenddo score will be impaired.

Lenddo's default rate is at a low level, similar to other companies in the microfinance sector, Stewart said. The Lenddo website has about 150,000 users, but not all users have been granted loans.

But some entrepreneurs worry that using social networking sites to assess risk has its own limitations. Sebastian Siemiatkowski, the Swedish online payment company Klarna CEO Sebastian Simyatkovsky, said the social networking site would be valuable only if users were willing to share information on Facebook sites, and whether users would be willing to make financial services Facebook data connections are also important.

Klarna obtains information from local credit institutions. The company notes that only a small percentage of users are willing to connect financial services to Facebook accounts. Klarna says the unpredictability of Facebook's platform, such as what data can be read and which companies can store, is also a serious challenge. "Facebook remains a problem, not a lethal weapon," he said. ”

Meanwhile, Fair Isaac is sceptical about the value of social networking sites in risk assessment. Fair Isaac Public Relations director Anthony Sprauvi (Anthony Sprauve) said the company does not plan to integrate social data in the future. "I think it's not a good thing to make a credit decision based on Facebook buddy data," he said. "he said.

Dean Karlan, a professor of economics at Yale University, Dien Kalan that consumers must consider the privacy issues associated with digital identities linked to financial operations and whether loans are still needed in the event of increased channels. "When we lower the loan threshold to a few clicks, we have to consider the issue of transparency and disclosure," he said. ”