Loan provider Kreditech, founded in 2012, is not a customer of Big Data Scoring. Instead it has developed its own social media profile credit scoring system. Last year it considered — and then rejected — the idea of offering its system to other lenders as sort of white-label service. It is now wholly focused on making short-term loans up to €2,500 at interest rates of between 6 percent and 42 percent, according to public relations manager Laurent Schüller.
Those are the actual amounts of interest paid, not the annual rates, which can be in the thousands of percent. The credit simulator on Kreditech's Mexican site, kredito24.mx, shows that borrowing 1,000 pesos for one month will cost 417 pesos, an annual rate of 6,881 percent. That may seem steep, but in the payday loan market such rates are all too common.
Kreditech also lends money in Poland, Spain, Russia, and the Czech Republic, the regions where it has gained acceptance mirroring those for Big Data Scoring.
Next on the list is Peru, according to Schüller's colleague Marie Laggner. The company previously operated in Germany, "but it just wasn't interesting for us. It's already well covered by Schufa," she said, referring to Germany's 86-year-old credit scoring agency. Similarly, she said, the U.S. market is already dominated by FICO.
Kreditech has already built up a model of how social media activity influences credit risk. It uses established social networking profiles to verify the information would-be borrowers declare on their application forms, assuming that while someone might lie on a form, they are unlikely to bother faking years of postings in order to secure a small loan.
"We use up to 10,000 data points. The traditional rating agencies use only five to 12," Laggner said.
The company doesn't just look at Facebook: It also asks loan applicants for access to their Amazon.com and eBay profiles, as well as social media sites local to the countries where it operates.
"If someone claims to earn €5,000 a month but buys a book on Amazon about how to deal with financial problems, that would be a red flag," Laggner said.
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