 "Watch out! Lenders are now tracking your social media profile")
If you are involved in clandestine gambling activities or drunk driving, watch out – you might be hampering your chances of getting a loan from new-age online lenders like InstaPaisa, GoPaySense, Faircent, CashCare and Vote4Cash! Lenders have been using an algorithm to track your social media profile for assessing your creditworthiness.
A report in the Economic Times on Monday says: "Online credit marketplaces like CreditMantri and BankBazaar.com that have found a clientele in the 25-35 age group do their due diligence on borrowers using not just payslips and bank statements but also unorthodox metrics like phone location data, SMS alerts and social media behaviour.”
How does it work?
The social lenders run their algorithms through tonnes of data in just a few minutes to assign someone a personality score. This score determines the rate at which the person would get a loan. The rate so determined could range from, say, 9% to 30% -- against the standard industry norm of 13-17%.
Besides, mobile phone data also give lenders and other financial service providers useful information about potential borrowers. From someone’s smartphone usage – how much the person spends on airtime, how he or she uses mobile wallet, etc – algorithms can determine both creditworthiness and need for credit.
The information that applicants voluntarily share on Facebook, Twitter and other such websites provide a fuller picture of these potential borrowers’ credit profile. For example, EarlySalary.com, which offers loans for tenures as small as a day to seven days, uses GPS coordinates, besides Facebook and LinkedIn data, to build a machine scorecard, the ET report says.
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Several other players are also tying up with e-commerce sites and telecom providers to find out whether a customer pays phone bills on time or is a frequent defaulter.
Those like Zest Money and Cash Care are offering consumer-durable loans to people who do not have credit cards for buying goods online. The idea is that a person’s social standing, online reputation and/or professional connections are some factors that should be considered while extending credit, as these serve as additional and valuable data sources which could be predictive of the person’s behaviour.
However, while culling out data from social media might be seen as intrusive, jury is still out on how much of it can be used for actual decision-making.