Credit institutions based abroad are using social networks to evaluate creditworthiness before lending money, believing that social utilities like Facebook can be useful when deciding whether or not to lend funds.
Online platform Lenddo, for example, is turning increasingly to Facebook and Twitter to assist those applying for credit. The company researches data from eBay and Amazon accounts to help identify sellers’ rating, time in business, transaction volume and other factors.
“People are really good at identifying those who are reliable within a community,” said Jeff Stewart, Lenddo’s co-founder and CEO.
USA-based online financing corporation Kabbage employs similar methods, claiming that it makes it easier to deliver small business financing using data gleaned from PayPal, eBay, Facebook and Twitter accounts.
According to Kabbage, it is possible to assess the level of risk while evaluating a loan in only seven minutes.
Hamburg-based Kreditech uses complex machine-learning algorithms to make better credit decisions, with the amount of credit offered based on up to 8,000 data points being obtained. Only then will a decision will be made about whether of not to commence the lending process.
There is so far no evidence to suggest that financial institutions in Portugal are using similar methods to evaluate loans, at least not officially.
Consumer watchdog DECO (Associação de Defesa do Consumidor) and the Associação de Sociedades Financeiras para Aquisições a Credito (ASFAC) have both said they have no knowledge of any Portuguese bank or financial institution obtaining data this way to verify creditworthiness.
“We’ve so far received no complaints [from the public] relating to this matter,” confirmed DECO’s Ana Sofia Ferreira to Expresso newspaper.
According to ASFAC the use of personal data has to comply with legislation that aims to protect individuals from the unwarranted use of their private data. However, additional legislation (67/98, October 26) allows the investigation of personal information without the permission of the individual if that same information is necessary in order to grant financial credit.
ASFAC general secretary, Susana Albuquerque, also speaking to Expresso, said that she was not aware of any credit institutions in Portugal adopting tactics like those of Lenddo and other online financing corporations.
However, analysis of credit risk is checked rigorously in Portugal, she stressed, adding: “Institutions always use public and private data bases specifically for this purpose.”