In what ways could companies like Experian and Equifax be disrupted?
Payments
Asked by Question Bot03/Jul/20141 answer
1 Answer
F
Faisal Khan
Answered 03/Jul/2014
Answer assumes you have access to transactional and banking data (as a very basic).
FICO score, like most things over time is approaching its retirement age. Whilst it still represents the very basis of credit in America, there are other factors to consider.
If I were to look at the problem, disruption would mean, destroying the old system and inventing a completely new one. I would seek aid from the educational sector, specifically universities. One would then try to develop a very complex but amazingly well scripted credit reporting, measuring and scoring mechanism that reflects the current 21st century economics and movement.
Tying the old, the new and the strange all in one. You would most likely continue to weigh in heavily on the old transactional data that comes from banks and card companies, but add to this mix, social media data (twitter, Facebook, LinkedIn, Quora, Pinterest, Google+, Tumblr, etc. activity) and try to come up with some pattern or mechanism that would aid in the credit scoring. Add to this GPS data, travel data, mobile phone (billing & usage data), online vs. offline buying data, and you could possibly come up with a pretty robust model to assign a credit score. I am confident other than the element of KYC, there exists hidden streams of data and patterns in social media signals, that can directly be applied towards a credit score.
Add reputation scoring (how your friends, family and peers score you or relate to you as a credit risk), agains all taken out from social media streams, GPS streams, micro-transaction data, etc.
I believe a person has various slabs of credit risk. These slabs need to be defined as not a single number but multiple numbers. Such slabs may be things like $50 (or under credit risk), Mobile credits/phone bill credit risk, House Rent/Mortgage credit risk, borrowing money from friend and family credit risk, even such scores as "if I split the lunch bill with X, will I ever see my money back?" risk. If a person who travels well, or often (plane, train or automobile) how can this be injected into the new scoring system. How does utility usage affect a person's credit risk?
The whole idea of credit/risk is getting complex, yet we continue to package it in a single solution with a 3 digit number.
Behavioral patterns from both within the financial world and outside of it need to be taken into consideration for the new system.
FICO score, like most things over time is approaching its retirement age. Whilst it still represents the very basis of credit in America, there are other factors to consider.
If I were to look at the problem, disruption would mean, destroying the old system and inventing a completely new one. I would seek aid from the educational sector, specifically universities. One would then try to develop a very complex but amazingly well scripted credit reporting, measuring and scoring mechanism that reflects the current 21st century economics and movement.
Tying the old, the new and the strange all in one. You would most likely continue to weigh in heavily on the old transactional data that comes from banks and card companies, but add to this mix, social media data (twitter, Facebook, LinkedIn, Quora, Pinterest, Google+, Tumblr, etc. activity) and try to come up with some pattern or mechanism that would aid in the credit scoring. Add to this GPS data, travel data, mobile phone (billing & usage data), online vs. offline buying data, and you could possibly come up with a pretty robust model to assign a credit score. I am confident other than the element of KYC, there exists hidden streams of data and patterns in social media signals, that can directly be applied towards a credit score.
Add reputation scoring (how your friends, family and peers score you or relate to you as a credit risk), agains all taken out from social media streams, GPS streams, micro-transaction data, etc.
I believe a person has various slabs of credit risk. These slabs need to be defined as not a single number but multiple numbers. Such slabs may be things like $50 (or under credit risk), Mobile credits/phone bill credit risk, House Rent/Mortgage credit risk, borrowing money from friend and family credit risk, even such scores as "if I split the lunch bill with X, will I ever see my money back?" risk. If a person who travels well, or often (plane, train or automobile) how can this be injected into the new scoring system. How does utility usage affect a person's credit risk?
The whole idea of credit/risk is getting complex, yet we continue to package it in a single solution with a 3 digit number.
Behavioral patterns from both within the financial world and outside of it need to be taken into consideration for the new system.