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Banking Start-Ups Adopt New Tools for Lending


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It's one thing to me to see different cell phone companies and other hardware makers creating new banking and credit card swipers for use on phones and tablets from every OS and maker. But this, well, I'm not sure I like it, despite it seeming inevitable. Looks like my good credit will continue to be credible. (pun int.)




"When bankers of the future decide whether to make a loan, they may look to see if potential customers use only capital letters when filling out forms, or at the amount of time they spend online reading terms and conditions — and not so much at credit history.


These signals about behavior — picked up by sophisticated software that can scan thousands of pieces of data about online and offline lives — are the focus of a handful of start-ups that are creating new models of lending.


No single signal is definitive, but each is a piece in a mosaic, a predictive picture, compiled by collecting an array of information from diverse sources, including household buying habits, bill-paying records and social network

connections. It amounts to a digital-age spin on the most basic principle of banking: Know your customer.


“We’re building the consumer bank of the future,” said Louis Beryl, chief executive of Earnest, one of the new lenders.

And in that bank, whether a customer uses proper capitalization and spends time reading terms and conditions of a loan may make him or her more creditworthy.


Yet the technology is so new that the potential is unproved. Also, applying the modern techniques of data science to consumer lending raises questions, especially for regulators who enforce anti-discrimination laws."


The rest of the article is here: http://www.nytimes.com/2015/01/19/technology/banking-start-ups-adopt-new-tools-for-lending.html?emc=edit_ct_20150122&nl=technology&nlid=36852580

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