Like many twitter using this morning, I’ve read and retweeted this amazing article from Charisma about the way Wonga (the payday loan company) uses big data to make loan decisions. You might think that your social media use may have little bearing on whether or not you are eligible for credit, but social networks like Facebook are one of a range of sources that the company uses to confirm identification and assess lending risk.
This slate.com article on the same topic includes a wonderful quote from ex-Googler Douglas Merrill, now at ZestFinance (a company who sells aggregations of data to aid credit decisions):
“We feel like all data is credit data, we just don’t know how to use it yet. This is the math we all learned at Google. A page was important for what was on it, but also for how good the grammar was, what the type font was, when it was created or edited. Everything.”
Everything.
You’d think with all this big data goodness that Wonga and the like would have no trouble with getting their repayments on time, wouldn’t you? But Wonga wrote off £77m of debt the year before last (when it made £46m of profit). UK Member of Parliament and campaigner against payday loan companies Stella Creasy notes that 57% of customers miss at least one payment and half are unable to repay entirely.
It would appear that many customers choose to “roll over” the loan – borrowing again to pay off the existing loan + interest. And companies like Wonga charge fees for missed payments, and have a very aggressive approach to debt collection.
Is it too much of a leap to suggest that maybe all this “big data” is being used to identify the most profitable customers, rather than the most suitable? Social media data can supposedly be used to make inferences about a persons lifestyle and IQ, after all.
Data may have presumptions of neutrality, but any commercial enterprise looking at using data to enhance decision making would most likely have an eye on profit. And what is good for business may not be good for people.
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