ET Bureau | May 30, 2016, 10.01 AM IST | Times Of India
The term ‘social worth’ is changing from one’s standing in society among peers to a figure derived from one’s popularity in social networking sites
MUMBAI: An individual’s social worth may come to mean more than one’s popularity with friends and colleagues. Social worth may become a tool to assess a person’s creditworthiness, especially for those who’ve just started working, and some agencies have already started using it.
Those looking to get a loan application processed quickly or at a lower rate of interest would do well to ensure they have the right contacts on LinkedIn and a good set of friends on Facebook. Just as the income tax department tracks your holiday photos on Facebook, banks and financial companies are increasingly looking at the ‘social worth’ of people to determine if there’s a risk of defaulting on payments.
The term ‘social worth’ is changing from one’s standing in society among peers to a figure derived from one’s social media connections, personal details and bank statements – an indication of how much a person can repay.
“This is becoming the norm mainly for first-time borrowers, for whom there is hardly any credit data available. To be able to lend to this section, banks are using alternative sources of data to decide on creditworthiness,” said Ranjit Punja, cofounder of CreditMantri, which has developed a proprietary software for this purpose. “We already have a public sector bank , a private bank and a large NBFC using our alternative data sources for their loan processing.”
While CreditMantri offers credit analysis, EarlySalary is a lender. This Pune-based startup, which has a non-banking finance company licence, provides instant credit to applicants by judging them on their social media contacts.
In 90 days of operations, EarlySalary processed applications for more than 1,000 borrowers worth Rs 1.4 crore across Pune, Bengaluru and Chennai.
“We are mostly lending to the youth who have just joined the workforce and are credit hungry. To be able to underwrite such advances, we are using the individual’s Facebook, Google Plus and LinkedIn data, which gives us a peek into the kind of person he is,” said Akshay Mehrotra, CEO of EarlySalary.
Mehrotra explained that it is mandatory for someone to have a social media presence to be considered for credit on their platform. They look at ‘mirror customers’ – similar people on the applicant’s contact list who have a credit score.
Source : http://goo.gl/4Re6Ac
Creditvidya.com | Updated On: May 23, 2015 17:10 (IST) | NDTV Profit
Do you have a number of friends or followers on Facebook, and other social media platforms? Do you get a good number of likes on your posts and professional updates? If you are answering in the affirmative, there may be good news for you, as some lenders may assess your credit worthiness based on your social media footprint in the not so very distant future, notwithstanding your CIBIL score.
Though it may sound a bit far fetched at this point of time, especially for us Indians, these methods of alternative scoring may be a reality for us, sooner than we can imagine. In technical parlance this kind of scoring method is reffered to as “big data scoring”. And this is why is it may become popular soon.
Moving beyond the traditional
There is no denying the fact that it is a difficult task for lenders to assess the credit worthiness of an individual. So far, a traditional three digit credit score has been used as a metric for judging how much risk there would be in lending to person. In the Indian context, the CIBIL score that is available with India’s premiere Indian credit bureau, CIBIL, is widely accessed by lenders. This is because it is easily available and inexpensive. In fact, the Reserve Bank of India has now made it mandatory for all banks to base their initial judgment based on the CIBIL score.
Lenders therefore are on an overdrive at the moment to educate the general public at large that in order to maintain a good CIBIL score, one must maintain good financial habits such as re-paying credit card outstanding amounts, keeping overall credit utilization under 30 per cent and re-paying loan installments on time. While there is no undermining the importance of maintaining these good financial habits, the fact remains that the current credit scoring system may “punish the guilty” with a “sentence that may be larger than one’s crime”.
In other words, there may be untoward circumstances in one’s life like a job loss, an accident or a death in the family that may throw one’s finances in a complete state of disarray. This in turn may lead to poor credit score because of his inability to repay his debt on time. On the other hand, these may the times, when he is likely to be in most need of credit. However, under such a situation of duress he will be unable to have any access to credit because of an unflattering CIBIL score.
Betting big on big data
But what if the lenders consider an alternative scoring method instead? In cases where the credit report of a person has a blotch, the bank may consider the person’s personal data that may be found on social networking sites such as Facebook, LinkedIn and Twitter to asses his credit risk in addition to his CIBIL score. A person’s reputation online, his professional contacts and the value of his opinions can be a metric of his social standing and thus can be used to asses his credit risk. In today’s world of increasing digital footprint, this does seem like a viable option, given the fact that big data assessment systems are sophisticated and have a large positive impact across industries.
In fact, this method of “open scoring” as it is now being termed, has already commenced in the west. The Fair Issac Corporation or FICO in the United States of America , that publishes a score based on the consumer credit files based on the data available with three credit bureaus (Exeperian, Equifax and Transunion) is in the process of unveiling a new “alternate scoring model” for proving the credit worthiness of those whose FICO scores are not upto the mark because of bad or non existent credit. This will give a chance to a number of consumers to improve their FICO score.
This new scoring model is likely to use data such as utility bill repayment history, cell phone bills and cable bills and may later extend to social media data as well. As a result, American lenders will get access to a huge untapped market (approximately 15 million people) whose FICO scores are not so flattering at the moment. These are the people who have bad credit because of the impact of a major financial event or those who do not have a credit history because they have not used credit in the past.
Once these methods of alternate scoring become a norm in the developed markets, it is only a matter of time before India adopts such practices. There is enough reason to believe that this may happen soon, given the historical evidence. In the late 90’s when credit bureaus became big in the USA, India understood its merits and the retail banking system began using credit scoring models by mid 2000. And that was the time when social media had not been so rampant, and neither were hand held devices such as smartphones or tablets that popular. Today, the scenario is different. With the improvement in the economy, the aspirations of people are rising and so are the number of internet users.
According to the Internet and Mobile Association of India there are approximately 300 million internet users in India and this number is projected to go up to approximately 600 million by 2018. Out of these approximately 225 million (source: http://www.statista.com) , are projected to be users of social networking sites. Needless to say then, that the scope is huge especially in the Indian context. Indians traditionally have been wary of credit and thus do not have a good credit score for the lack of credit history. Besides, alternative scoring models may prove to be a disruptive when it comes to financial inclusion in India as well.
Long story short, those of you who have scant CIBIL scores and are dreading the fact that you may not get access to credit, there may be hope in the offing for you, if you are an active social media participant. However, this must not be used to have bad financial habits or not making an attempt to maintain a good CIBIL score. At the moment, one still has to maintain a score of 750 and above if one aspires to get a loan product or a credit card in India. And this norm will not change right away.
Disclaimer: All information in this article has been provided by Creditvidya.com and NDTV Profit is not responsible for the accuracy and completeness of the same.
Source : http://goo.gl/qlTzsg
Mayur Shetty, TNN | Jan 7, 2015, 01.08AM IST | Times of India
The bank is building a host of services around its mobile applications. One feature allows customers to send money to contacts even without any information about recipient’s bank details.
MUMBAI: The rapid adoption of mobile banking and banking apps is prompting bankers to forecast a complete transformation in the manner in which banking is done in two years. Besides the predominance of the mobile platform, end-to-end digitization will allow acquisition of customers online and analytics would help targeted marketing.
“We are seeing a big rise in mobile transactions and there is also a change in what they expect from banking apps. They are now comparing banking apps not with other banking channels but with the experience they get in other apps,” said Shanti Ekambaram, president (consumer banking), Kotak Mahindra Bank.
The bank is building a host of services around its mobile applications. One feature allows customers to send money to contacts even without any information about recipient’s bank details. The recipient receives a link — either in the form of a text message or a mail — requesting bank account details and the funds are instantly credited.
The bank is also talking to third-party merchants to integrate their sites with its own app. What this means is that customers can buy flight tickets by merely selecting the flight without having to go through the payment process, which is where most of the failed transactions occur.
“We have also started hashtag-banking where customers can get their service requests fulfilled by tweeting to the bank,” said Ekambaram. The bank’s Jifi account, which integrates banking with social media, received international recognition by receiving the best new product award by Efma and Accenture in Barcelona a few months ago.
“I expect that in two years time, we will see complete end-to-end digitization of process where fulfillment will take place seamlessly. The banks can put an end-to-end process in place but the question is how long the customers will take to adapt?” said Ekambaram.
Most banks have put in place a missed-call service where customers can get a text message of their balance by merely making a missed call from their registered mobile. Similarly, most private banks have put generation of debit card and credit card PIN under the self-service mode. This has resulted in a substantial drop in use of ATM for non-cash transactions.
SBI, the country’s largest lender, has seen enrollment for mobile banking services rise and it currently has 1.25 crore customers registered for mobile banking. In 2014, the bank saw its mobile banking transactions grow 41%. The interesting part is that over 70% of these customers are from non-metro and the average value of transaction is Rs 7,052.
According to Arundhati Bhattacharya, the bank’s chairman, the recent launch of message-based banking will lead to an explosion of mobile banking in the country. She added that mobile banking is part of the bank’s aggressive strategy to decongest branches after opening 1.85 crore new accounts under the Jan-Dhan Yojana.
The two concerns over the adoption of mobile banking is to what extent illiteracy will be an impediment and concerns over security. “The Indian consumer has always surprised me with their ability to adopt technology. Whether they are literate or not, they have always been technology literate as they know which number they have to press for what transaction,” said Chanda Kochhar, MD & CEO, ICICI Bank, told TOI this week.
Source : http://goo.gl/b2xGv7