A fintech startup is attempting to humanise the credit market by using unstructured data such as social media signals.
The new company, Hello Soda, has developed a platform that assesses customers' creditworthiness based on what its founders believe is more relevant data than the traditional credit rating model which are based on historical financial performance.
For example, unstructured data through social media may give more of an idea of applicants' true circumstances, such as a recent promotion, say the company's founders, three former employees with credit reference agency Callcredit.
Hello Soda also believes that its approach will not only reduce fraud but lead to more responsible lending through a greater reliance on human behaviour in the credit decision making process.
"That human element, especially in lending, disappeared before the financial crash in 2008 when the world changed, leaving many people unable to access credit," says co-founder and chief executive James Blake. "With the exponential growth in online data, it makes sense to take a ‘snapshot’ of a person’s real life and cross reference that with traditional metrics to further verify an individual’s application in a way that benefits the customer and lending provider."
Hello Soda's launch comes on the back of a report released today by the Consumer Finance Association (CFA), Credit 2.0 - a commentary on spending and borrowing in the 21st century, which criticises lenders for failing to keep up with current consumer habits. In particular, it says that traditional financial services providers have been left standing by a number of short-term lenders using pioneering technology.
"Technology is changing the way we live and our 'instant society' demands quick decisions, simple products and convenient ways to borrow small sums for short periods of time," said CFA boss Russell Hamblin Boone, addressing UK members of parliament upon the launch of the report. "Critics of innovation that refuse to accept the change by holding back the tide could find themselves swept away by modern life."