Banks using social media to assess loan applications

Updated

Big data is big news at the moment with the Government planning to access big data as it battles to protect Australia from terrorist attacks.

According to long time social media strategist and University of Sydney academic Laurel Papworth, big data should be renamed "too big data" because there is so much of it. Far too much for any human to read or understand.

But computers can and, using algorithms, they can look at tens of thousands of pieces of discrete information and make sense of them.

Speaking on ABC TV's The Finance Quarter, Laurel Papworth said Facebook, for example, can look at where you live, who your friends are, and what you are talking about online or on Twitter, Linkedin and so on.

She explained that Facebook can also know how your business is doing, what you are buying, what you are selling, what you are doing on your credit card and even what rewards programs you use, such as Fly Buys.

According to Ms Papworth, Facebook will form a profile of you and make decisions about who you are and what you are like. Getting that right is worth billions in potential sales.

It is well known that companies use big data to more accurately target product offerings at their clients. For example, Westpac has a program called Know Me where it follows the internet browsing history of its customers and then offers them products and services based on that history.

But Facebook, and others, also like to share their big data and that is where your problems can start.

Laurel Papworth believes in the commercial world big data is evolving from a sales tool to a risk management tool, which is where you and I need to pay attention.

She said companies are using big data to decide whether they want to do business with you, such as banks using your Facebook page to decide whether to give you a loan.

Choose your friends carefully

She pointed out that your Facebook friends can have a big influence on that decision.

Laurel Papworth said banks will look at your friends' Facebook profiles and ask questions like: 'Have they paid their loans recently?'; 'Are they taking expensive holidays?'; 'What suburbs do they live in?'

She said they look at your friends, your family, your whole 'tribe' and then might say, 'mmm, they look a bit risky.'

In other words, 'do you hang out with the wrong crowd?'

Sound fanciful?

Australian online lender K24, a division of German company Kreditech, is open about its use of big data and complex algorithms to make what it calls, "better credit decisions".

According to the K24 website its technology "identifies and scores individuals from anywhere in the world in seconds through the use of over 10,000 data points to make decisions to lend within minutes."

Starting next year Mastercard will be accessing Facebook big data, analysing it and selling it to banks.

Initially it will be for pushing products, but who knows where it will end? Laurel Papworth said lenders in 36 countries are now using Facebook data as part of their tools for approving or rejecting loan applications.

She said banks here will not volunteer that they are using big data for this purpose though, and that is also what the ABC has discovered.

When we contacted a senior Westpac executive to ask that question her response was that she would have to limit the discussion to sales and service.

Laurel Papworth warns that, in the world of big data, if our Facebook friends are not paying back their loans that is going to have an impact on us.

She adds that it is going to be very tricky for people to escape their place in life, which they will find very confronting.

The solution?

Choose your Facebook friends carefully.

Topics: banking, internet-culture, internet-technology, social-media, australia

First posted