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.'"

Comments

The entire credit history thing is stupid

[FreeCoder]

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.

Re:The entire credit history thing is stupid

[im_thatoneguy]

I disagree. I live off of credit for day-to-day things for a very simple reason: my income is very consistent and infrequent (payday).

I know how much money I'll have at the end of the month down to the penny. I also know that my credit card is due 1 month after the statement. So if I want to make a big purchase that I can't afford for instance I can buy it now and pay it off in up to 2 months interest free. My bank account usually has enough cash on hand to cover my monthly expenses but when it doesn't I use it to smooth out the discrepancies between my wants and my pay-dates. Why wait a week for pay-day when the credit card bill won't be due until the end of the month? It makes my income and my expenses both equally predictable instead of the haphazard day-to-day uncertainty of spending.

As a result I've never paid a penny in interest, I've flown around the world on my miles and my bill paying is far more predictable and automated.

Re:The Laws Of Personal Finance

[Anonymous Coward]

In civilised countries you only need steady income and a valid payment plan.