Big Data

Blog | The LenddoEFL Assessment Part 1: Using psychometrics to quantify personality traits

By: Jonathan Winkle, Manager of Behavioral Sciences, LenddoEFL

At LenddoEFL, we collect various forms of alternative data to help lenders verify identities, analyze credit risk, and better understand an individual. One of our most important tools for financial inclusion is our psychometric assessment. While some people still lack a robust digital footprint, everyone has a psychological profile that can be characterized and used for alternative credit scoring.

In this series of posts, we shed light on the science behind the LenddoEFL psychometric assessment and how we’ve pioneered an approach to measure anyone’s creditworthiness.

Psychometrics for credit assessment

LenddoEFL employs a global research team to ensure our assessment captures the most important personality traits that predict default. We deliver innovative psychometric content by combining insights from leading academics with years of in-house research and development.

Each question in our assessment is targeted to reveal psychological attributes related to creditworthiness. We quantify behaviors and attitudes such as individual outlook, self-confidence, conscientiousness, integrity, and financial decision-making in order to build an applicant’s psychometric profile. By comparing this profile to others in the applicant pool, we can better understand and predict an individual’s likelihood of default.

Psychometric example content: Financial Impulsivity

The marshmallow test asks children whether they would you like one marshmallow now or two marshmallows later, and since its advent, psychologists have recognized that the ability to delay rewards is an important predictor of later success in life.

While adults might not long for marshmallows the same way children do, a similar test can be performed using financial rewards, and research shows that people who are better at delaying rewards are less likely to default on their loans.

Drawing from this research, we ask applicants which of two options they would prefer, a smaller sooner amount of money, or a larger later amount (see image below). Asking people for their preferences across a range of monetary values and temporal delays reveals a quantitative profile of their financial impulsivity, which is indicative of their likelihood to repay debts (If you’re curious about how we deal with people trying to cheat or game the assessment, please see this blog post on our Score Confidence algorithm).

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Psychometric example content: Locus of Control

When times get tough, some people believe they can take action to overcome hardships while others believe that the challenges they face are altogether out of their hands. Those who believe their lives are governed by outside forces, an external Locus of Control, are more risk-averse and have more difficulty managing their credit.

We ask applicants to rate their agreement with a battery of statements measuring their Locus of Control, such as “My life is mostly controlled by chance events,” and “It is mostly up to luck whether or not I have many friends.” By asking these types of questions, we can precisely quantify someone’s Locus of Control along a spectrum of internal-to-external and use this data to predict default.

Conclusion

LenddoEFL delivers an innovative psychometric assessment by combining evidence from academia with active, internal research and development.  The examples above demonstrate how we quantify certain personality traits, and the myriad exercises we use in the field allow us to produce a rich psychological profile that is predictive of credit risk. In the next post we will explore the concept of metadata, which will show that how people answer psychometric questions is just as important as the answers themselves.

Press Release | LenddoEFL Launches eKYC Solution to Speed Up Verification in the Philippines

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Aligned with Philippine banking regulation, technology-aided verification from LenddoEFL can help more people get faster, more convenient access to financial services.

MANILA, PHILIPPINES (PRWEB) AUGUST 28, 2018

LenddoEFL, whose verification, credit scoring, and consumer insights helps leading banks make data-driven decisions, launched an electronic Know Your Customer (eKYC) product for customers applying for credit card and bank accounts at Philippine financial institutions consistent with Bangko Sentral ng Pilipinas (BSP) regulation.

To date, Know Your Customer (KYC) regulations in the Philippines have always required a face-to-face or real-time online interview to onboard new-to-card or new-to-bank current account/savings account (CASA) customers.

Now, customers will be able to get verified as part of a CASA or credit card account application faster and more conveniently by opting-in to avail of the eKYC solution from their mobile phone. LenddoEFL’s eKYC solution offers a simpler way for banks to onboard new customers. See BSP Circular 950, Subsection X806.2 item D for details on using information and communication technology (ICT) in the conduct of face to face contact.

“This is a game-changer as we continue to adopt alternative digital verification and scoring to help push for a more secure, faster and reliable verification process to onboard more unbanked and underserved segments into the financial system, supporting BSP's mission of financial inclusion,” said Judith Dumapay, APAC Sales Director Philippines, LenddoEFL.

Each bank considering to use technology-aided verification must do so within their risk-based customer acceptance policies and anchored on the results of their risk assessment process. They also remain responsible for watchlist screening.

Read in PRWeb.com

Blog | Digital Identities: Learnings from GSMA’s User Research in Sri Lanka

Smallholder farmers in Sri Lanka interviewed as part of the digital identity research

Smallholder farmers in Sri Lanka interviewed as part of the digital identity research

Recently, our friends at GSMA’s Digital Identity Programme and Copasetic Research set off to research digital identities and how they could support smallholder farmers in Sri Lanka. Their key hypothesis was:

“If MNOs, financial institutions, government and other service providers had access to a smallholder farmer’s ‘economic identity’ (income, transactional histories, credit worthiness, rights to/ownership of land, geolocation, farm size, and other vital credentials), they could provide access to more and better tailored services that enhance their productivity.”

In speaking with 40 smallholder farmers in Sri Lanka, as well as 7 stakeholders and 5 agri experts, GSMA learned a lot about the need for digital identities. GSMA invited LenddoEFL’s input in advance of the field research so we were keen to review the learnings. Below are some of the key findings of the report and how it relates to our work at LenddoEFL.  If this is interesting, we recommend reviewing the full report.

Source: Digital Identity for Smallholder Farmers: Insights from Sri Lanka

Source: Digital Identity for Smallholder Farmers: Insights from Sri Lanka

Identity is valued, but farmers are unclear how it relates to additional benefits
In Sri Lanka, the government is rolling out a new smart ID card giving increasing access to official identity. But farmers do not immediately understand how new forms of identity can be used to help them get access to more services (e.g. more tailored information services). Once they make the connection, they see the value clearly.

Identity is valued as it relates to accessing credit
Farmers and banks do not connect directly in many cases and farmers tend to have informal manners of connecting to credit through their buyers and agribusinesses. Banks don’t always have the information they need to cater to farmers. And the microcredit model can be more of a burden on the farmers than it’s worth. The research found that smallholder farmers are happy for their trusted service providers to work together and share information to enable access to credit. But since many farmers receive their income informally, the thought of sharing this information too widely (particularly with the government) caused some concerns.

Source: Digital Identity for Smallholder Farmers: Insights from Sri Lanka

Source: Digital Identity for Smallholder Farmers: Insights from Sri Lanka

Digital ID must build on face to face relationships
In Sri Lanka, farmers rely on and trust institutions with whom they have built local, personal, face to face relationships and these will be the best channels to roll out new systems and technology.

Farming is changing
Climate change and globalization mean that the work of a farmer is changing. Traditional farming skills are no longer enough. Farmers need to be constantly re-considering which crops they will grow now and in the future due to changing weather conditions and fluctuations in profitability. Younger farmers in particular are looking outside of their communities to the internet for new information. This new information needs to be combined with better access to financial services, allowing farmers to finance the transition to new crops, and hedge some of the risks in experimenting with new approaches.

ID needs vary across farmer types
The research found that a farmer’s financial stability and the extent to which they are embracing change (i.e. changes to farming practices, or the use of new technologies) have the most significant influence on their digital identity needs and priorities. GSMA mapped farmers across a 2 by 2 with the axes of poorer → wealthier and embracing change → stuck/fearful of change. In each quadrant is a unique farmer with unique needs. See report for more.

All of this means there is opportunity to better serve farmers (and other small business owners).

Farmers need better access to formal financial services:
Digital financial profiles could allow farmers to access savings, credit or insurance more conveniently and cheaply. Note that farmers were concerned about sharing their income information with a lender for fear it would get to the government and increase taxation or reduce welfare support. Credit scoring using psychometric data could be a good fit for farmers as it relies on personality profile data created at the time of assessment rather than existing financial data.

Read the full report

Contact us for more info on LenddoEFL’s credit assessment

NewsWav | CTOS & LenddoEFL partner to boost financial inclusion in Malaysia

KUALA LUMPUR: CTOS Data Systems Sdn Bhd (CTOS), Malaysia’s largest credit reporting agency, has entered into a partnership with LenddoEFL to enable access to financing for Malaysian consumers with little to no credit history.

Both CTOS and LenddoEFL have aided banks, lending instit…

Read more in NewsWav

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Yahoo Japan | Can Japanese banks use big data with "AI loan"? (日本の銀行は「AI融資」でビッグデータを活用できるか)

Attempts to calculate the creditworthiness of individuals by AI (artificial intelligence) and to finance using it are expanding. This is called "AI score lending". 

 The meaning of AI doing loan screening, which is one of the most important tasks of banks, is quite large. 

 However, the question is whether Japanese financial institutions can handle big data. If it can not do it, it will repeat the failure of the past score lending. 

Singapore's Lenddo is a service in emerging countries such as India, Vietnam, Indonesia, which have never had a history of credit. 

Read full article

Medici | What Happens at the Convergence of Machine Intelligence and Online Lending

Credit scoring and approval rates changed substantially with the arrival of alternative lenders, mainly due to the adoption of new practices in collecting and analyzing potential borrower data. Alternative data has played its role in expanding horizons for financial institutions and for creating an opportunity to enter the financial sector fir technology startups and data-rich international companies.

While social media, for example, as a source of data for creditworthiness assessment is still at a nascent stage, certain startups are already claiming to have incorporated information from social networks into their frameworks. In the quest to reinvent the way to assess consumer-related risk (as well as extend credit to unscored and questionable), startups were found more imaginative than traditional institutions.

Alternative data requires alternative approach to data analytics, which wide adoption of machine learning and artificial intelligence brought.

Read full article

Medici | How BigTech Challenges Banks

The evolution of bank-FinTech narrative brought us to a logical point, when FinTech is no longer perceived to be a threat to traditional banking, but rather as an instrument in re-establishing their position in the financial services industry. The narrative, however, doesn’t end there. As Citi emphasized in its March 2018 Bank of the Future: The ABCs of Digital Disruption in Financereport, traditional banking is being challenged not by small FinTech startups, but by established tech giants because of:

Big data customer insights

"Social media has been recognized by Wharton as an important data source for credit scoringback in 2014, although the practice of judging a stranger based on his/her social environment is not really new. One of the core ideas is that “who you know matters.” Companies like LenddoFriendlyScore, and ModernLend use non-traditional data to provide credit scoring and verification along with basic financial services. Those companies are creating alternative ways to indicate creditworthiness. The information contained about a person in social networks can provide some sort of verification that the person exists at all and who that person is."

Read full article

 

PRSync | The Future of Artificial Intelligence in Banking

 

"The Future of Artificial Intelligence in Banking", report examines the most significant uses of AI in retail banking, in both front-office and back-office implementations.

Companies Mentioned:
Admiral
Amazon
Atom Bank
Bank of America
DataVisor
Ernest
EyeVerify
Facebook
Google
IDnow
Kasisto
Lenddo
Moneyhub Enterprise
Olivia
PayPal
Personetics
Plum
POSB
Starling Bank
USAA
TrustingSocial
Wells Fargo
ZestFinance
Inquire for Report at http://www.reportsweb.com/inquiry&RW0001866700/buying

Read full article

AstroWani | CTOS, LenddoEFL extends financial inclusion in Malaysia

30% of Malaysians with good potential is still denied access to loans. This is because they lack or directly have no credit history. In order to curb this issue, Malaysia's Largest Credit Reporting agency, CTOS Data Systems Limited, partnered with Fintech LenddoEFL company and emerged with a new solution.

30% of Malaysians with good potential is still denied access to loans. This is because they lack or directly have no credit history. In order to curb this issue, Malaysia's Largest Credit Reporting agency, CTOS Data Systems Limited, partnered with Fintech LenddoEFL company and emerged with a new solution.

Markets Insider | CTOS & LenddoEFL Partner to Boost Financial Inclusion in Malaysia

KUALA LUMPUR, Malaysia, and SINGAPORE, CTOS Data Systems Sdn Bhd (CTOS), Malaysia's largest credit reporting agency, has entered into a partnership with LenddoEFL to achieve a joint vision of financial inclusion for Malaysian consumers with little to no credit history. Both fintech leaders have aided banks, lending institutions, utility and credit card companies to reduce risk, increase portfolio size, improve customer service and accurately verify applicants. Read full article.

How email and smartphone data help you get a loan

What your phone habits reveal about you

SoFi is preparing to launch in Sydney, its first market outside of the US, and earlier this year the country's first loans and deposits marketplace, Lodex, formed a partnership with Singaporean start-up Lenddo to bring its social scoring technology to the country...



Read more: http://www.afr.com/technology/how-email-and-smartphone-data-could-help-you-get-a-loan-20171212-h02zi0#ixzz534zFfQmg