Lenders are beginning to doubt the effectiveness of using a potential borrower’s social media accounts as indicators of creditworthiness.
As The Wall Street Journal reported Wednesday (Feb. 24), regulatory hurdles, data access and public perception have all played a role in lenders backing off from the idea of using a person’s social media information to determine credit.
Even Facebook made the decision last year to toughen up on outside companies, such as lenders, that try to mine its systems for user information.
“It’s difficult to pin a business model on social media data,” Alex Sion, president of digital consumer banking startup Movencorp, told WSJ. “Facebook itself has changed its approach towards data,” he added, making it “really difficult” for lenders to access information concerning a borrower’s online presence.
“We had to come up with alternative ways to [gauge risk] based on some info we pull from [applicants’] phones and marry to our data.” Borrowers must agree to have their mobile calling and texting patterns used in an analysis, he added.
“All data is credit data,” said online lender Zest Finance CEO Douglas Merrill. “However, we do a subjective calculus,” choosing what data to use, he added. “We’ve determined it’s creepy to use social media.”