People could have their digital lives measured to see if they are worthy of a loan. Photo / Thinkstock
People could have their digital lives measured to see if they are worthy of a loan. Photo / Thinkstock
Young people struggling to access financial services due to a lack of a credit rating can sign up to have their entire digital lives ranked to see if they are deemed worthy of a loan.
Australian firm Lodex has come up with a radical idea to give customers a "social scoring" out of 1000 based on their digital footprint by accessing 12,000 bits of data from their online life including emails and smartphone usage.
Sound creepy? Maybe, but Lodex co-founder Mic Phillipou says it is anything but, news.co.au reports.
"It's all completely voluntary," he said. "If you don't want to do it, you don't have to.
This is simply a way of helping people who had no way of accessing credit find a way in.
"Obviously, we comply with the Australian privacy principles. It's all done onshore. It doesn't look for any personal information and it is all secure."
What you buy at the shops and online, how many hours you spend watching films, what bills you pay, when you charge your smartphone and how quickly you respond to emails could be constantly monitored and evaluated to judge how "trustworthy" you are.
Banks would then be able to see the individual's score and judge whether they were eligible for financial services including mortgages, personal loans, car loans, credit cards or savings accounts.
Lodex says up to three million Australians are frozen out of the system. Photo / 123RF
Our online data or digital footprint is already collected through internet giants like Google, Facebook and Instagram or health-tracking apps such as Fitbit while the idea of rating people and services is already creeping into our lives.
Take Uber, for example, where customers receive a rating after every trip and drivers can then refuse to pick-up passengers with unfavourable scores.
The trend is reaching new levels in China, where the government wants to introduce a Social Credit System in 2020 - to monitor the behaviour of its 1.3 billion citizens.
Your score would then be publicly ranked against that of the entire population and used to determine your eligibility for a mortgage or a job, where your children can go to school - even your chances of getting a date.
But Phillipou and Lodex co-founder Bill Kalpouzanis believe their auction platform including Credit Score and Social Score algorithms could help millions of Aussies to get loans.
Phillipou says more than three million people including first home buyers, students, recent graduates and the recently divorced - mostly women - were excluded from the financial system in Australia because they lacked a formal credit history.
The big idea is that most of these consumers carry a smartphone, are online and connected through email, leaving behind a digital footprint that could be analysed to better understand who they were and their attitudes towards credit.
Lodex say Australia could be the first country in the world where banks use social credit scoring to check the modern-day risk of a consumer while helping them to get a loan, better rates or deals through their social media or digital behaviour.
It's all based on an algorithm that assesses 12,000 bits of data from your online life and gives you a score out of 1000.
According to Lodex, this algorithm can determine how likely you are to repay your loan - with the social score acting as a proxy for a credit score.
The rating system is being called the 'Trivago of banking'. Photo /iStock
So what are they looking at?
Social Scoring is used by some banks and lenders overseas, but not yet adopted by Australian banks. It is mainly through consistent online behaviour and your attention to detail when writing emails.
They look at how quickly you reply to emails, if you have a signature on your email, if you chat to the same people online consistently, what time you use social media and if it is consistently at the same times each day.
They even take note of what time of the day you charge your phone.
"People are not obliged to do it by any stretch of the imagination - the objective is to help people," Phillipou said.
"What I'd say to people is, you should only do what you are comfortable with, like anything.
"It's only one part of our unique delivery model that adds value.
"It's secure, safe, fast, free and it can certainly add value in terms of being able to inform them around the proxy for their credit score.
"And, it's something which we think banks could use to complement their credit decisions, especially those with thin or no credit files.
"From our perspective it's about challenging your financial situation and finding another option."
So, what are the benefits?
Lodex says its social credit scoring is particularly useful if you don't yet have a credit history or you are in the midway credit bracket, a common scenario among majority of the population in Australia, according to the company.
"We have three million people who are excluded from the financial system in Australia," Phillipou said.
"This means they and their families are at risk of poverty and poor social, emotional and health outcomes.
"All the major banks plus many of the minor banks are all committed to helping many of these people into prime banking.
"Essentially, through social scoring, we provide an answer which helps inform them and potentially allows them to take this risk on consumers and lend them money.
