2 fintechs tie up to offer AI-driven credit scoring

Singapore

TWO Singapore-based fintechs have teamed up to extend their reach into the underbanked market in South-east Asia by using data-driven forms of credit scoring.

Alternative credit scoring provider CredoLab on Wednesday said it has partnered personal finance comparison website GoBear to launch smartphone Easy Apply, in Indonesia, the Philippines, Thailand and Vietnam, that allows banks, financial institutions and lenders to extend credit using artificial intelligence.

Underbanked consumers that use the app and are found to now be eligible for credit will be able to get more access to financing - such as personal loans and credit cards - as well as insurance from various financial institutions that distribute their products via GoBear's comparison engine.

These consumers become eligible for such financial products if the analysis of thousands of data points from their smartphones, such as the amount of time spent surfing the Web at night, or the number of long incoming calls during work hours, throws up a positive scorecard based on such alternative credit-scoring methods that have been developed in recent years.

In the case of CredoLab, its proprietary algorithms extract and analyse over tens of thousands of data points from applicants' smartphones. CredoLab claims to look at up to 120,000 "characteristics" or behavioural traits of a customer using his or her smartphone, and turns that raw data into alternative forms of information that can determine credit scorecards for consumers.

CredoLab said that the scorecards' overall predictive strength stands at up to 0.6 in its Gini Coefficient - a common measure of predictability of alternative credit scoring. This beats the industry average of 0.3. A higher Gini in this case means more predictive power.

Easy Apply is made to offer faster and higher approval rates on direct applications for credit cards and unsecured loans.

Both partners said this deal would go some way to providing financial services to more than 110 million underbanked people in South-east Asian markets.

They also cited an EY report this year that suggested financial inclusion activities are now a matter of sound business, with this market representing an estimated US$88 billion in revenue by 2020. This comes as well as average credit-card penetration in South-east Asian markets excluding Singapore and Malaysia stands at just 5 per cent.

CredoLab has already sold this technology on its own to about 40 banks and fintechs. These clients are found in key South-east Asian markets such as Indonesia, Malaysia, Singapore, Thailand, Vietnam and the Philippines. It also has sold the technology to clients in markets such as China, Mexico, Mongolia and Georgia.

In a media statement, Peter Barcak, co-founder and CEO of CredoLab since its launch in 2016, the fintech has helped its clients to lower their cost to risk, and boost approval rates by nearly 45 per cent.

BT understands that working with a comparison site allows CredoLab to earn a cut in the referral fee that GoBear earns when the comparison service introduces a customer to a bank. This typically differs from working directly with a bank, where the revenue for CredoLab is driven by a subscription model.

CredoLab said it focuses on metadata from smartphone usage as they are more reliable than other forms of alternative credit-scoring data points such as social media activities or psychometric assessments.

CredoLab is a fintech that emerged from the portfolio of venture-builder firm Forum, and is backed by Fintonia Group and Walden International.