Time to social engineer our private lives

As mobile banking and P2P lending gains traction, so innovation must meet demand for speedy credit decisions. Cue the social profilers

Loan origination has taken an interesting turn towards the plethora of free online data so is it time for consumers to social-engineer their private lives?

It’s been around for a while but is getting to the point now where it’s becoming the norm. Already HSBC and Wells Fargo quite openly employ companies to provide social media analytics to improve approval rates in their loan origination.

This method truly comes into play when a loan is referred- it’s used as an add-on. When applying for loans, customers are invited to grant access to their social media activity to “improve the chances of doing business”, ie so a lender can scan their feeds for signs of impulsive or irresponsible behavioural patterns. If something negative is flagged, the application is likely declined. If there is nothing, it is likely approved. This is particularly helpful in cases where very little credit history is available, yet the person could be perfectly responsible and turn out to be a great customer. Or an unbanked customer- currently they’re all pooled together as one large high-risk category.

However, the analytics pull the person’s friends under the radar as well. Talk about being judged by the company you keep. Suddenly someone else’s minor gambling affliction played out on Facebook can tar a friend’s credit application. And this somebody may not even be your friend, we all know the insignificant value of strings of Facebook ‘friends’. And how many of them post about dubious activities on nights out.

Other factors are taken into consideration as well to populate data fields in the race to deliver a reliable credit decision. The type of browser used by the consumer (consider Safari a safe bet); the time of day an application is made; the location; IP address; operating system..

The fact is, if these algorithms are undisclosed, we don’t know how the data points are being scored, giving rise to fair lending issues and potential discrimination.

A recent report by the US Proceedings of the National Academy of Sciences on digital data profiling highlighted the efficacy of predicting all manner of attributes from the person’s Facebook Likes. For example, “Users who liked the Hello Kitty brand tended to be ‘open’ but low on ‘conscientiousness’, ‘agreeableness’, and emotional stability’.

The report concluded that a wide variety of people’s personal attributes, ranging from sexual orientation to intelligence, can be automatically and accurately inferred using their Facebook Likes. “Similarity between Facebook Likes and other widespread kinds of digital records, such as browsing histories, search queries, or purchase histories suggests that the potential to reveal users’ attributes is unlikely to be limited to Likes. Moreover, the wide variety of attributes predicted in this study indicates that, given appropriate training data, it may be possible to reveal other attributes as well.”

However, there is still the upside, which is that it opens up the world of credit to those neglected by consumer finance. But the consequences of that could be far-reaching also. Consider the thousands of Wonga consumers who were approved loan after loan before piling up unmanageable repayments. Wonga has been using these credit scoring methods for quite a while.

Other lenders such as German Kreditech are more upfront about what exactly they’re interested in when they ask for access to customers’ Facebook pages: news feed, activities, home town, education plus that of all their friends.

It boldly states banking as we know it today is dead. The branch won’t exist ten years from now and algorithms and automated processes are the way to customer-friendly banking. They call it Algorithmic Banking.

It further states that it uses 20,000 dynamic data points to credit score anyone, “including the four billion individuals without a credit score”. The only stipulation is that a user has and operates a smartphone.

Provenir is by no means the first to employ this method but it will soon no longer be a novelty but the norm. Exactly how regulation will catch up with it remains to be seen, particularly given the generation coming of age now whose lives are played out on social media without a second thought.

Maybe there is another upside- in this small way, social media feeds might be smartened up, people might cop on to the consequences of their public profiles; and to the fact that it’s getting harder and harder to operate a private profile online.