07-Jul-2017 written by : FSI-Team
Social media has become an integral part of our lives- there are no two ways about it. While the degree to which someone is active on various media platforms may vary from one person to another, almost everyone has at least one account on a platform such as Facebook.
Social media has tremendous potential, which is why banks and other financial institutions have starting experimenting with the data obtained from it. There are several credit rating agencies in US and China that are trying to get a better reading on the creditworthiness of users on the basis of their those activities. So, it won't be wrong to assume that the High Mark, Equifax, CIBIL rating agency, etc. in India can follow suit in the near future.
Your social media activities can tell a lot about you. For instance, these platform for professionals such as LinkedIn can be used to verify your job status and educational background. Similarly, your Facebook posts alone can tell about your personality which can be used for calculation of your credit score. Banks know this and are thus trying to use this data to their advantage.
In India some of the many credit rating agencies that have already started using alternative measures for the estimation of creditworthiness.
They combines data points on the basis of location, transactions done, and personality trained to assess the creditworthiness of an individual. For instance, its engine can check whether a person checks their emails from a location they have said their office is located at. It can also refer to the various internet searches performed by the individual to learn more about them.
Lenddo, which started its operations in India in 2016, also uses Big Data and data analysis to assess the credit risk of loan applicants. However, the agency says that it's only focusing on loans ranging from Rs. 1 lakh to Rs. 8.5 lakh in India for now.
Let's make one thing clear from the beginning- most credit rating agencies, especially in India, are not really excited about the use of social media for the assessment of creditworthiness.
Harshala Chandorkar, who is the COO of CIBIL, the largest credit rating agency in India, believes that the data obtained from from these media can be subjective and open to interpretations. She has also said that although social media involvement in credit score calculation is hyped today, only time will tell how advantageous is that. On the other hand, traditional credit score calculation models are tried and tested and thus highly reliable.
Should you be worried about getting an undesirable personal loan interest rate because of your social media activities? The answer is "yes".
Big Data and Data Analytics are becoming indispensable tools for business enhancement today, as more and more companies have started tapping into the potential that the Internet has to offer.
Traditional banking products are gradually being replaced by Fintech products that offer better and faster services at low costs. Online banks, mobile based payment systems, etc. are some of the examples of the growing Fintech industry. These companies will use data obtained from the internet, especially from social media to learn about their customers and also assess their creditworthiness. For instance, Peer 2 Peer lender LenDenClub is checking the credit and loan information of applicants along with their employment records and repayments of online purchases.
Although the use of these once in financial services is increasing, there is still plenty of time left for the new-age credit score algorithms to become a standard. This should not mislead you, however. You will need to pay high attention to your loan repayments, credit utilization ratio, credit card debt, etc. if you want an attractive personal loan interest rate in future.