In one example, a person might be found to recharge a phone often, which could undermine creditworthiness. The logic behind that decision would be based on correlating frequent battery charging with other factors, such as how old the handset is, how often it is used, what apps are used and how much battery power those apps consume, Litan noted.
"A lot of battery charging alone isn't necessarily correlated with bad credit, but it could be a case of an old phone with a battery that had to be charged a lot and therefore a conclusion is reached that the user couldn't afford a new phone," Litan explained. "No lender would rely on just that single variable to evaluate creditworthiness."
Based on usage patterns of 150,000 smartphone customers in Kenya and Tanzania, as collected by lenders there and reported by the Wall Street Journal, good credit risk customers are correlated with those that make calls in the evening to avoid daytime prices and with those that receive more texts than send them (which would make sense if it costs more to send than receive a text, as is often the case abroad).
Bad risk customers drain their phone battery more quickly than average or send more texts than they receive, the data on users showed.
The data also correlated smartphone gamblers and frequent travelers with those likely to repay loans. Some analysts theorized that known gamblers might be familiar with the harsh penalties (such as getting knee-capped) for missing a loan payoff. Frequent travelers, in turn, might be more familiar with the concept of borrowing money, and paying it back, when making transportation and housing arrangements in advance.
Branch app for Kenya borrowers, built by Silicon Valley startup
Branch International offers a free Android app for use in Kenya that allows for loans of up to 50,000 Kenyan Shillings (about $490 U.S. dollars). According to Branch's website, a user can download the app and the funds are delivered to a mobile money account in under five minutes.
Also on its site, Branch says it "collects data from your phone when log in to our app. This includes information about your device, SMS logs, call logs and contact lists. We use this information to assess your creditworthiness and provide a seamless experience when applying for a loan."
Branch also tells users it it will not sell such information to third parties or share it unless for certain business purposes like reporting to banking authorities. The app has been downloaded more than 50,000 times.
The average branch loan is reportedly just $30, charged at between 6% to 12% interest, based on a borrower's creditworthiness.
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