A firm is exploring ways to link people's social media network with their ability to pay back a loan, writes ALON MWESIGWA
Are you fond of accepting friends on your social media platforms anyhow? Or do you just comment on or share content just for just? Stop it!
In typical ‘tell me your friend, I tell you your character,’ a finance and technology company is exploring people’s behaviour on social media and their ability to pay back a loan from the bank. The assumption is that your social media friends speak of your social standing and behaviour.
The idea is being championed by Social Lender, start-up founded by Nigerians and is one of the fintech firms currently being tested at the Barclays Africa Group headquarters in Johannesburg.
Fintech is a buzzword used to mean finance driven by technology. A lot of start-ups are working on technologies changing the way people are making transactions.
Nvalaye Kourouma, the chief digital officer, Barclays Africa said the idea is “who is your friend?”
“The lender can be able to assess your credibility for a loan [looking at your friends on social net- works,” Kourouma said. “If you’re a friend with Obama, then there is a likelihood you may pay back.”
Social media networks have already become a key avenue for companies to assess one’s employability. People have lost jobs because of what they post on their social media platforms but some have gained employment because of their social media life.
Now that lenders might start using them to inform their decisions on who to give a loan or not means they have become so impactful in our lives – far from just socialising.
Kourouma said Barclays is yet to use the idea to assess its clients but “it is promising”.
“It is one of the start-ups we are helping. We’re testing and it has to show that this idea can be used on 1,000 clients,” he said, indicating that it means the start-up has to work out a way to track many clients at one go.
Most formal lenders depend on credit reference bureaus to look at one’s likelihood to service their loans. These look at past behaviour whether you have ever defaulted or have other loan obligations from other institutions.
Exploring your social media networks means banks are going beyond the traditional parameters of looking at a borrower to now also assess their social life, which most likely will be found on their Facebook, Twitter and other social network platforms.
For instance, someone sharing money-making or business-related content on their Facebook walls could be an indication they are interested in business. When they access finance, they are likely to use it better than someone sharing nude pictures of a local socialite.
What you post can also indicate whether you are extravagant or not. A perceived-to-be-extravagant person may not get a quick node from the lender compared to one thought to be frugal in their money handling habits.
Technology start-ups are receiving huge funds because of their potential to change the way people access financial products easily. They attracted $12bn of investment in 2014, up from $4bn the year before, according to The Economist.
In Africa, Nigeria’s ($109m), South Africa’s ($96.7m) and Kenya’s ($92.7m) fintech start-ups received the biggest chunk of that money last year, according to a report by Partech Ventures. Ugandan fintech start-ups only received $270,000 last year.