Companies that lend to the unbanked or South Africans without credit scores are expected to use data gleaned from smartphones to develop an alternate risk profile for a potential customer.
While the concept is already entrenched in countries in Asia and Europe, it is new in SA. But it is expected to be used more frequently in the future as banks and other lenders look to widen the pool of new customers.
Singapore-based CredoLab, which provides credit scores based on mobile data to more than 50 companies in 16 countries, announced this week that it had signed up three SA clients including a major bank.
However, CredoLab’s sales director for Europe and Africa, Michel Massian, would not divulge who its new SA clients were.
The group expects to provide 3.5m credit scores globally next year with its biggest customer base in Indonesia, followed by the Philippines.
CredoLab’s software is integrated into the customer’s banking app and accesses phone information including contacts, calls made, received or unanswered and creates a profile of a person to predict a delinquent customer.
When the company enters new markets such as SA, it tweaks its algorithms taking into account the phone use of a bank’s top customers.
In most countries Credolab works with existing bank customers who have no credit history and offers to give banks a picture of their customers’ willingness to repay debt.
Massian said: “The principles of credit scoring were first developed in the 1950s when they triggered economic development. Today traditional scoring needs to be supported by alternative methods to do the same. Many consumers with huge potential to create wealth don’t yet have a credit history.”
Earlier this year Irish-based credit reporting company Experian launched the app GeleZar targeted at unbanked informal business owners in SA.
The app is pre-installed on low-cost smartphones that begin at about R250 and teaches basic financial literacy to SA users.
But it also captures data from their phone use and location to develop a picture of creditworthiness and their earnings.
The app and algorithm development was funded by a World Bank grant. It is designed to create a profile for someone with no bank account.
The head of finance at Experian SA, Simon Rudman, said in a statement that the company wanted to be able to offer credit to small informal businesses in townships that employ between one to three people but struggle to access formal finance.
Poor consumers without credit or even a banking history often are charged far higher interest rates and may be forced to use loan sharks.
The data gleaned by GeleZar can reveal how much money they spend, as many users may not have a formal bank account.
World-Wide Worx founder Arthur Goldstuck said that a data point such as a location can reveal if a person goes to the same place regularly, such as a place of work.
Goldstuck said location data can show how much money a person spends on public transport. The amount used on cellphone airtime also provides information on spending patterns, he said.
childk@businesslive.co.za
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