Times are tough. And, when things get tough, hopefully you can turn to your friends. But borrowing from friends is never easy. This is where some innovative credit companies come into play.
Using Big Data technologies, two companies, Lenddo and KrediTech are turning to social media and other information about you and your friends instead of the traditional FICO score or credit reporting agencies.
Lenddo leverages your friends on Facebook to see if you are friends with creditworthy people. If you end up hanging around (or are friending) delinquent people, Lenddo may conclude that the social circles of which you are a part, may be less reliable overall.
Kreditech extends the notion of Big Data even further. The German company reports that it uses up to 8,000 data points in assessing your application for a loan. Some of these data points are “soft”. In the article sourced below, the reporter noted that “your chances of getting a loan improve if you spend time reading information about the loan on Kreditech’s website. If you fill out the application typing in all-caps (or with no caps), you’re knocked down a couple of pegs”.
These indicators are more psychological, and therefore, softer or more subjective than something like a FICO score. But what both of these companies recognize is that individuals are just that, individual! They also recognize that there are some situations in which individuals have no control – such as a global downturn in the economy, or divorce, or other unforeseen natural or man-made disasters.
Companies like these enable otherwise stranded individuals, ready and willing to pull themselves up from a tough situation to start over, and help those individuals to exploit their potential.
The article also mentions a B2B company, Kabbage. Neuralytix has first hand knowledge of this company. We have had an opportunity to work with Kabbage as part of our research in this space. The data that they received from us included our activities on sites such as PayPal (for credit card payments), social media activity, and an online sharing of our financials. Apart from a phone call to the representative working with our research to clarify a few minor details, the entire process was seamless, and performed online.
Kabbage advised us that the approval process is entirely computer based, and no human intervention is actually required. Despite the relatively short time in which Neuralytix, Inc. as an entity has existed, we were approved for credit, something that traditional routes may not have yielded.
Only time will tell if these companies are more successful than traditional means. But one thing that both of these companies are doing is leveraging the wealth of data and information available to them. They are also drilling down to the individual, and not grouping individuals into “buckets” that may not be fully reflective of the opportunity.
While Lenddo and Kreditech currently operate in certain tight credit markets, Kabbage is working with Intuit. It can take advantage of a company’s QuickBooks data if the owners allow it, and use the information as a source for consideration.
The credit market has seen some tremendous ebbs and flows over the last several decades. Subprime disasters and collapses of major financial institutions have resulted in the abuse of data and information and convoluted arbitrage. However, all these companies address one very important and extremely difficult situation for those who can benefit from credit – giving the individual a chance, not based on mistakes of the past (or lack of activity), but on the actions that they have taken, and the person (or company) that they are. While financials institutions don’t forget easily (as least not for 7-10 years) when it comes to credit related mistakes, these companies do give those who have sustained challenges in the past, a way of rebuilding.
Kabbage has advised us that at this time, they do not report to any credit reporting agency. Neuralytix believes that this must change. We believe that it is only as a result of these companies that a strong, driven economy of individuals and small businesses will help to bolster and sustain the global economy. The risks are high, but so are the rewards.