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Ever more personal data will in the future determine whether people can get a loan or buy goods on instalment. If a person consents, before a decision is made about granting themĀ creditĀ they may be asked for permission to examine not just repayment of past loans but also other private information: what model of phone they have, whether they actively use mobile internet, whether they often do not answer calls.
It may even be suggested that they play a real-time game whose outcome will determine whether they as a customer are creditworthy.
While companies that giveĀ creditĀ have typically relied only on information gathered by financial institutions, now more and more personal data will influence decision-making. WhetherĀ creditĀ is granted, how much, and on what terms may depend on whether a customer is ready to share that information.
āThereās no doubt that personal data can only be used with the personās consent,ā Creditinfo Head of East and Southern Africa, Kamau Kunyiha immediately stresses. āBut practice shows that openly sharing additional information increases a creditorās trust, lets them more accurately assess each customerās trustworthiness, and even allows customers to expect more favourableĀ creditĀ terms.ā Research conducted by Creditinfo has shown that knowledge about a customerās personal habits gives creditors just as many insights as formal data.
A recent conference āScoring Kitchenā by Creditinfo, which rates the creditworthiness of companies and individuals in more than 50 countries, addressed what is new in the scoring process. For example, a study was done together with telco company on how peopleās financial reliability relates to their everyday behaviour. Analysis of the data revealed that even how long people use one telecom operatorās services shows which ones are financially more trustworthy: the longer someone uses the same telcoās services, the more financially reliable their loan-payment history is too. And on the contrary, customers who frequently change operators generally demonstrated a higher level of riskiness.
Those without 4G and who use mobile internet little fall into a higher-risk groupĀ Ā
Creditinfo analyst Allan Anyona, who took part in the study, also notes that individuals who are less financially reliable tend to have more modest internet plans and rush to connect as quickly as possible to free Wi-Fi networks at home and elsewhere.
Moreover, it was observed that the more advanced the network connection a potential customerās phone supports, the greater their creditworthiness. So, customers using phones that support 4G network requirements are seen more favorably than those whose phones only work on a 2G network or do not make such information available.
Many missed calls points to a frequent debtorĀ
Creditors get useful insights as well from data about whether a potential customer often fails to answer incoming calls. People were divided into five categories: those who fail to answer calls very often, often, an average amount, rarely, and very rarely. It turns out the most financially reliable were those in the last two groups. The riskiest customers, meanwhile, were among the people who āmissā calls more often than others.
āWe assume that people experiencing financial difficulties avoid answering calls as they do not want to talk with creditors or with relatives to whom they may also be in debt,ā the Creditinfo Group analyst explains.
With smart devices revealing increased information about consumers, creditors are eager to actively look at other habits too ā like the use of a mobile wallet. The more punctually a customer tops up their mobile wallet limit and the bigger their income, the higher theirĀ creditĀ rating will be. Conversely, the smaller someoneās income is and the longer they useĀ creditĀ provided by a telco, the more cautiously other lenders will view them. So those people should not be surprised if they are not allowed to buy a more expensive item on instalment or are refused a biggerĀ creditĀ limit on a payment card.
Games show how you will behave with real moneyĀ
Seeking to get a more objective assessment of a customerās creditworthiness and to automate the decision-making process, psychometric data are being used ever more actively. A future customer may be asked to play a quiz that takes 5-7 minutes. It may be a series of questions, like: how would you use an unexpected gift of ā¬200 ā would you spend it on entertainment or save it? Studies show that the customers who meet their financial obligations most responsibly tend to choose the answer āI would save itā in the game, while the riskiest customers more often choose āI would spend it on entertainmentā.
āWe realize that over time skilled players learn to choose those answer that creditors view more favourably. But in calculating any individualās rating, dozens of other factors are also assessed, like their insurance history, repayment of earlier loans, payment of utilities bills, and so on,ā Aurimas KaÄinskas notes.
The pandemic also altered how companies are rated ā there are new factorsĀ Ā
Kamau Kunyiha says the challenges of the pandemic in 2020 are also changing the rules for rating businesses. New factors have arisen that impactĀ creditĀ scores. For instance, a new indicator for the impact of Covid-19 has altered the current ratings of companies all over the world. It shows how the coronavirus pandemic has impacted every area of business (e.g., tourism, hotels, manufacturing, transport, etc.) and how companiesā creditworthiness relates to the geographic location of their operations, demand for the goods they produce, and possibilities for quickly recovering after restrictions and quarantine end. Businessesā ratings are also heavily influenced by a āCollectionā indicator that reflects whether a company punctually settles with its creditors.
āWe have no doubt that the new factors that are coming up will have an increasing significance for companiesāĀ creditĀ scores ā in a time of economic turmoil, itās very important for creditors to objectively assess every customerās riskiness and make the most accurate decisions possible,ā he says
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