Do you call your mom more often? Then perhaps you have a higher likelihood of getting your next loan application approved than someone else who calls his or her mom less frequently.
You might wonder if this is a joke. But it is not. It won’t be too long before your entire credit score depends on your phone records or digital footprint—your Facebook posts or your followers and whom you follow in return.
According to Managing Director Richard Hartung at Transcarta, a Singapore-based consultancy on retail banking, the leading global and regional lenders are already putting this phenomenon into practice.
“If you call your mom more often, you have a better credit score and the same is true when you have more friends (online),” Hartung told a forum on digital banking in Colombo, organised by Fiserve, a US-based provider of financial services technology, mainly to banks and other financial services-related companies.
In this context, you must be more careful than ever because your credit application might get rejected by your bank if you have a history of offensive or provocative online conduct and your network of friends and followers consist of people who can’t be trusted.
Gone are the days where the branch manager knew you personally, your family and your other associations and instead he will assess your credit history probably based on your mobile phone records or online footprint.
Disruptive innovations in the financial services industry have advanced rapidly during the recent past and things such as data analytics, automation, disintermediation and robotics process automation have enabled lenders to do a complete 360 degree credit assessment on borrowers – that is also in a few seconds.
This was not possible a few years ago and hence it is now important with whom you hang out online than offline—probably the deciding factor whether your next loan gets approved or not.
These technologies have made the ‘know your customer’ (KYC) process much easier than the existing tedious process of filling applications and verifications, which are not always proved to be true. Currently, in Sri Lanka, the only tool available for a bank to ascertain the credit worthiness of a borrower is his Credit Information Bureau (CRIB) report but not everyone is registered with the CRIB.
Hence, the ubiquity of mobile phones and Internet has enabled the banks and other financiers to easily obtain a borrower’s credit history and ascertain if he is worthy enough to be lent.
On the one hand, this will significantly reduce the risks and costs associated with accurately assessing a client.
On the other hand, the borrowers will also benefit because a large section of unbanked and under-banked segments in society could be provided with financial solutions; otherwise they would not have been served as they do not have a formal credit history. Meanwhile, speaking at the same, Fiserve Digital Sales Lead Asia Pacific Wayne Benson said however much the innovations disrupt the financial services sector, the need for brick-and-mortar channels would not be phased out.
According to him, both digital and traditional channels are required to co-exist because while the digital channels will do the on-boarding of the client, the true servicing will still have to be carried out via the branches.
Pix by Damith Wickramasinghe