Would You Be Prepared to Share Your Browsing History to Get a Loan?

A working paper published last year by the International Monetary Fund and discussed on its blog looks at using people’s browsing history to evaluate their creditworthiness or credit score, a fundamental variable that determines everything from the number of credit cards you can apply for to obtaining approval for a loan.

In practice, the idea is little more than a reflection on how technology companies can easily access sparsely distributed but high quality data, from browser and hardware characteristics to browsing, search or online purchase history, which can be used to feed algorithms to determine somebody’s creditworthiness much more accurately than the type of data traditional financial institutions typically use. The study differentiates the contribution of innovations in information gathering that these technology companies may have at their disposal, from innovations in interaction and in the distribution channel, which points to the replacement of traditional banking branches with instant messaging applications.

The creditworthiness metrics used by traditional financial institutions are usually highly simplistic, generating situations that in some cases unfair and in others borderline absurd. I remember my impression when I arrived in the United States with a reasonable salary from a Spanish company, and how the only credit cards they offered me were for students, with a token limit that would never meet the expenses I needed to organize my life there, and how my only hope came from hacking the system by getting a credit card company to “import” my credit history of the last few years in Spain to the United States and thus endorse my creditworthiness. The situation was surreal: I was a perfectly solvent person who could prove it very easily, but the system was limited to criteria that refused to recognize it, as was the case when they told me that they could not take into account income coming from non-US companies.

Would having data on my network use have helped my credit rating? Possibly yes, given that at the time, internet usage was a variable that tended to indicate a certain purchasing power, but logically, access to that data would have impacted on my expectation of privacy. Today, it is quite possible that from the type of data generated by an analysis of variables such as browsing, hardware used or purchases made over the internet, correlations can be obtained to allow an accurate assessment of somebody’s creditworthiness. Another question is whether we would be happy providing this kind of information. But in many cases, such as when a company offers a means of payment of some kind, such data can be very easy to obtain.

But beyond the measures that might help anonymize such data or process it while protecting our privacy, do large technology companies have easier access to data that could be used to assess our creditworthiness, along with better communication channels to offer financial products? Frankly, the question seems very easy to answer, and in itself justifies many of the fears that traditional banking may have regarding what large technology companies will do in the future.

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This post was previously published on Medium.

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