Data Cross-Referencing is a Must
Monday, September 10, 2007
In a country where more people have mobile phones than bank accounts, credit information
companies that assign credit scores based on payment histories are getting active to study
this population.
Bangalore-based Otco International is a credit information company that services borrowers who do not have any previous credit histories. Collin Timms , Director, Otco International Ltd, and chairman of Guardian Bank, spoke to ET of the opportunity.
Once licensed by the RBI, we can mine data from the Election Commission, utilities and other service providers to help assign credit scores to borrowers. We can access payment patterns from these sources. Under the Credit Information Companies (Regulation) Act, credit bureaux can access data from sources that contribute to lending decisions.
Further, we need to make a cross referencing of this data. We believe that data from telecom providers will prove vital while profiling credit histories, though under the Act, we cannot tap into subscriber lists of telecom companies. The RBI guidelines specify accountability in transferring data to third party and also places limits on the use of data.
Can credit scores be the only factor to determine credit-worthiness?
We strongly advocate that credit scores should be used as an additional tool, over and above traditional factors that influence lending decisions. With loans almost being mass produced due to the robust growth in retail lending, credit scoring runs the risk of mechanising the way credit worthiness is determined. Relying solely on scores would mean selling your soul to mathematics.
Unfortunately, in some markets different racial groups have different credit scores. But such practices are divisive in nature, where an entire population will have a broad score indicator. Different groups have different algorithms to arrive at credit scores. Profiling is done based on geography, urban or rural. Ideally, while assigning credit scores, statistical factors and models should not be biased against any particular demographic group.
How can mobile banking be used to access the bottom of the pyramid?
For mobile companies making headway into banking, two issues have to be dealt with, security and authenticity. A bank is a custodian of public deposits, and a telecom company dealing with banking services has to ensure that the information has to be authentic.
Telecom companies have an entire communication infrastructure at their disposal. They can really drive down operational costs. With intense competition between telecom players, revenues from mainstream operations will not be able to sustain their expansion. They will inevitably look at other options including banking services. Their capability at mass distribution is what will really drive growth. The crux is cost of delivery.
In Philippines, telecom companies have got licensing to undertake banking operations. But the RBI giving a licence to telecom companies to undertake banking operations, seems unlikely at this stage. Going forward, talktime provided by telecom companies can even be traded as currency. It is already happening in other countries.
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