A new generation of Artificial Intelligence (AI) programs could soon be deciding whether you get the next loan you apply for… rather than the traditional credit-scoring systems. A US startup, founded by a former Google employee has developed systems after trialing them in China, where a minority of people have credit scores in the conventional western sense.
MIT Technology Review reports –
“Los Angeles-based ZestFinance, founded by former Google CIO Douglas Merrill, claims to have solved this problem with a new credit-scoring platform, called ZAML. The company sells the machine-learning software to lenders and also offers consulting services. Zest does not lend money itself… The platform was fine-tuned based on the experience Zest had working with the search engine Baidu in China, where only 20 percent of the population has any known credit history. Studying 21 different factors such as how people search and the way they traverse between Web pages, Zest discovered patterns in Baidu’s data that could be used to decide whether to make small loans to those customers for purchases like clothing. Among the things Zest evaluated was how well a person’s self-reported income matched up against their “modeled income,” what Zest calculates that person actually earned based on other behavior. Just as important as how much discrepancy there is between reported and modeled income is when they report the inflated income (in other words, income that’s higher than what the model implies they’re actually making) and how much they inflated it, Merrill says.”