Tech startups changing the face of money lending
This article was first published on 9 January 2013.
I thought this article was worth posting for four reasons:
- Firstly, it’s a wonderful illustration of how “big data”, when properly used, can give an organisation a real strategic edge. As the article says “The more accurately a lender can assess a borrower’s risk of default, the more accurately a lender can price a loan.” The ability to analyse 70,000 different risk indicators makes it possible to manage risk with tolerances that or orders of magnitude better than those provided by traditional credit risk scoring systems.
- Secondly, it’s interesting to note again that this opportunity was identified and incubated by a finance industry outsider and not by one of the large industry incumbents. That’s notwithstanding the fact that the incumbents were probably in the box seat in terms of access to information etc. to actually develop an offering like this.
- Thirdly it demonstrates that there may be a number of niches within an industry that incumbents are prepared to see disrupted as long as the fundamental order of the industry isn’t compromised.Pay day loans might be one such area.
- Finally, it reinforces in my mind the disruptive threat that an organisation like Google poses to so many industries. It has unrivaled access to information, the technical capability to use it, very deep pockets and the demonstrated intention to exploit those assets in areas not immediately associated with its original core business (for example, Google’s work on the self-driving car). While this story isn’t about Google per se it demonstrates the value of the capabilities and culture they are building.