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Lenders may eye smartphone use before giving you a loan

Matt Hamblen | Dec. 7, 2015
The practice is already being used with loans given in Kenya, Tanzania.

Branch is a Silicon Valley startup founded in early 2015 by Matt Flannery, who now serves as its CEO. He was co-founder of the non-profit, a microlending group.

Analysts said it is likely that Branch and other startups will expand the use of their apps beyond Kenya, probably to other developing nations. But it is possible that such apps could be used for lending money to needy residents in the U.S. or other developed countries. Officials at Branch and other institutions couldn't be reached to comment on their expansion plans.

For nearly a decade, residents of Kenya have been able to transfer money with cheap cellphones, but the monitoring of smartphone behaviors to determine creditworthiness is fairly new.

A recent 60 Minutes report described the widespread use of cheap cell phones for transferring funds in Kenya without the need for a bank or credit history. Safaricom, a wireless company, launched M-Pesa in 2007 in Kenya for peer-to-peer texting of money with the backing of Vodafone; the service has since expanded to Tanzania, Afghanistan, South Africa, India and parts of Eastern Europe.

Other players

Santa Monica, Calif.-based InVenture Capital Corp. has made loans in Kenya and Tanzania via smartphones. The company uses more than 10,000 data points per mobile user to determine credit risk, according to its website.

InVenture is headed by CEO Shivani Siroya, a former officer for the United Nations Population Fund. The company lists several investors, including Google Ventures.

Other companies in the space include Saida, which provides quick loans via smartphone in Kenya and relies on a Google Play app to monitor smartphone behaviors. That app was developed by Greenshoe Capital in Los Angeles, founded by Kenneth Ngetha and Kyale Mwendwa.

It's not just smartphone behaviors being monitored

While recent startup activity has focused on smartphone behavior tracking, other companies focus on user behaviors on social networks like Facebook. One example is Lenddo, which works by loading code onto a desktop or mobile device with the user's permission.

Other companies like Affirm, LendUp and ZestFinance have long used social media and other online behavior, as well as data from data brokers, to determine creditworthiness of U.S. consumers. Analysts believe these kinds of companies would be interested in adding in smartphone behaviors outside of social network activity to determine risk.

Litan noted that major U.S. wireless carriers have been monitoring smartphone behaviors for five years or longer to find the customers most likely to buy products and services. The business intelligence applied by carriers to smartphone behaviors helps determine who are the "influencers" who buy products and services and who can influence their peers to buy more, she said.


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