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Banks Using Mobile Phone Usage To Gauge Credit Risk
Hugh Pickens writes "A new startup is revolutionizing the way financial service companies meet the needs of an estimated 2.7 billion people worldwide with a mobile phone but no access to formal financial services by developing sophisticated modeling software that can look at usage data from consumers' mobile phones and make predictions about credit risk. 'There's a vast market of consumers in countries like Brazil, China, India, and the Philippines who want access to financial services like credit cards, loans, or insurance,' says Jonathan Hakim, chief executive of Cignifi. 'But while they may have jobs, and some have bank accounts, there really is no credit history for them.' The way you use your phone is a proxy for your lifestyle say the developers. 'We're looking at things like the length of calls, the time of day, and the location you make them from. Also things like whether you top up [a pre-paid SIM card] regularly. We want to see how stable the patterns are. When you look at that, you can create these behavioral clusters that give you information about users' appetite for new [financial] products, and their ability to repay a debt.' Currently operating in Brazil, Cignifi doesn't plan to deploy the technology in the US. in the near-term. 'The business opportunity is so much bigger in Brazil, India, China, and Mexico, where you have around half a billion people in those four markets alone who have a mobile phone but no banking relationship.'"
The countries listed, and where credit is not usual for people but mostly businesses (and only then for billing duration), have it more right than US. In the United Status people need to take loans just to build up their credit history, which is just useless costs. The only justified things for loans should be loans for starting businesses, houses and maybe cars. Living on credit for your everyday things is just stupid and bad for economy. And this also includes credit cards, even if you pay them back as soon as you get the bill.
They just use this as a mean of hiding the fact that banks really have no idea if you'll be good for the money they are loaning you. They are just trying to get the contact numbers of your friends and work associates so they can harass them when you don't pay up.
So, phone companies are selling who i call, how long and where did i make the call to this companies? Isn't that invasion of privacy?
FUCK OFF
I normally do not use those strong tones in my slashdot replies but what I do, and what videos I watch are no ones business! Why is this even for sale?
When employers tried to call your doctors and pyschologists to weed out applicants with potential issues like depression people were outraged and HIIPA became law. The medical industry hates it but it was a must as in an alternative universe anyone who has taken an anti depressent would be labeled a credit risk and unemployable or someone with ADD would be unemployable and another credit risk etc.
I think the same should apply. I mean what is next? Installing video cameras that view into your house all over the street? Maybe looking for who you invite over or what you do in the bedroom next?
http://saveie6.com/
Course that would only be a sane thing to do if interest rates were positive and reasonably above the real rate of inflation.
Deleted
Almost enough said.
Assuming such correlation is useful for credit analysis, how does someone other than the telcos access that kind of information to produce such evaluations?! I'd say it is private information. Correct me if I'm wrong...
Pretty much all credit cards charge no interest if you pay in full every month. And many charge no fees to the cardholder. Indeed quite a few even give a small part of the fees they charge merchants to the cardholder to keep their business; as "rewards."
If you're not paying off your credit card in full every month, then you should consider rolling that debt into a longer-term debt product with a lower and more stable interest rate anyway. CC's charge usury rates if you keep a balance. Not quite as bad as payday loans, though.
Can you be Even More Awesome?!
In most countries cell phone service is pre-paid. From what I understand if u don't have extra money in your account the extra service like pay-for numbers doesnt go through. Can anyone with more info on this verify?
That is correct, and I'm surprised this method is so alien to the US.
It used to be the normal way of paying for mobile phone service in the UK... and it still is, just about:
This phenomenon has been especially evident in the UK, where since Q4 2007 the share of contract customers has risen from around a third (35.4 percent) to almost half (48.6 percent in Q2 2011) of all subscribers, due in part to the introduction of new types of contract tariffs aimed at attracting existing prepaid users to switch to contracts.
(Source)
With a pre-pay phone you don't need a bank, credit card, address, or any of the infrastructure for that. The original method (still used) to add balance is to buy "vouchers" from a shop. Scratch of the silver panel, type it into the phone, £10 instantly credited. Nowadays you can also top up online, by text, by phone, by credit/debit card, at an ATM... lots of ways. But the vouchers are still sold everywhere.
I think most children have a pre-pay phone, also most students, and many people with a low-paid job. And people who don't use mobile phones very often -- including my well-paid parents and my grandparents. (Although the statistics are probably skewed by tourists and other visitors. I have a contract with a British company, and a pre-pay SIM for Germany, since I travel there fairly often. I swap the SIMs around in the airport, and get cheap calls and internet in Germany.)
Usually, a phone call (or YouTube video, or whatever) cuts out as soon as the remaining credit is used up. The phone continues to receive calls and texts, and allows whatever methods exist to add credit, contact customer services etc.
I'm not a tinfoiler (in fact, part of my job is to try to help tinfoilers) but this is just another (? inexorable) step towards total information awareness. MasterCard and others have demonstrated an almost spooky ability to make future predictions based on seemingly irrelevant data, predictions that hold true and provide valuable guidance for large populations, despite the fact that individuals will be harmed. With a little more database interconnectivity, coupled with a gigantic complex of computers, there's no limit...
-Dan
Not supporting is much more powerful than influencing and it allows everyone to decide for themselves without forcing it on others. My decision not to support X corporation will not affect someone else who has no problems supporting X corporation. Of course, if by me and others not supporting it, it can no longer remain profitable and closes that is fair enough, but my decision in and of itself doesn't affect someone else who may enjoy supporting X corporation.
The US is not a capitalist state. There is nothing legal that says that the business philosophy of the US is capitalism. If you look in the constitution it never says anything about it being a capitalist state. On the other hand, if you look in the legal documents of the USSR, North Korea, Vietnam, etc. they will all say that they are communist states, while (aside from perhaps some successor states to former communist states) no state practicing "capitalism" ever declares it. Capitalism is simply the default method of organization that everyone innately participates in. So long as we all have different talents and exist in a society larger than say a single family unit, division of labor and voluntary trade will exist. Such simplicity is the core of capitalism. Someone has something that you value, be it knowledge, talent, time, energy, products, etc. and you have something that they value, therefore it benefits both of you if you trade.
But no, capitalists don't want to let people live their life, they've intruded upon many many cultures and civilizations, and resent being told to keep out, that they can't have things. Don't believe me? Just go ask some indigenous cultures. What's left of them.
Is completely false because the nations that did that did not do it because of their economic system, but rather by their government system. Even then, the only major ideology that truly embraces (pure) capitalism is the libertarian philosophy (speaking from a US point of view of course, the word libertarian means different things in other cultures) which are completely non-interventionist and would let people live however they want. It is the statists that want to conform.
If you want Marx's communism, you need a (minimal) government and one that embraces capitalism because it is the only way that would provide enough choice to allow for Marx's vision of communism to exist. If government enters into communism you simply get Stalin 2.0 or Kim Jung-Il 2.0. So, paradoxically, a philosophy of capitalism is needed if you really want communism to succeed. Because capitalism is the only national economic system based on voluntary trade, it is the only system conductive for a non-totalitarian communist commune to exist.
Taxation is legalized theft, no more, no less.
It used to be the normal way of paying for mobile phone service in the UK... and it still is, just about:
Actually, no it wasn't; pre-paid mobile phones came out a long time after contracts. I can say this with a straight face because I happened to be working for one of the phone companies when PAYG first started*.
That pre-pay customers outnumber post-pay has nothing to do with how long the service has been available. If I were to guess I'd say the increase in the proportion of contract customers was a result of newer, "must-have" handsets (smartphones in particular) being priced so highly when bought sim-free or with a pre-paid SIM.
With a pre-pay phone you don't need a bank, credit card, address, or any of the infrastructure for that. The original method (still used) to add balance is to buy "vouchers" from a shop. Scratch of the silver panel, type it into the phone, £10 instantly credited. Nowadays you can also top up online, by text, by phone, by credit/debit card, at an ATM... lots of ways. But the vouchers are still sold everywhere.
Scratch cards were done away with years ago, primarily because of printing costs and fraud.
Usually, a phone call (or YouTube video, or whatever) cuts out as soon as the remaining credit is used up. The phone continues to receive calls and texts, and allows whatever methods exist to add credit, contact customer services etc.
Most, if not all networks now offer a reserve credit facility. An ongoing call may be disconnected when credit runs out (I'm not certain as I have a contract and I've since changed careers) but there is usually still room to make an emergency call.
*Amusing anecdote: when SMS messaging was a new thing Orange gave everyone ten free messages a day. That's all you got, though, because the billing system wasn't yet set up to actually charge people for them.
If God forks the Universe every time you roll a die, he'd better have a damned good memory.