
Lending Startups Look at Borrowers’ Phone Usage to Assess Creditworthiness - ssivark
http://news.yahoo.com/lending-startups-look-borrowers-phone-012800141.html
======
rockmeamedee
Wow, the practices these 'disruptive startups' are using are pretty much the
same as the bad guys in the dystopian cyberpunk novels from the 90s. They read
the whole smartphone, including emails, (charging history?), address book and
more.

Just a reminder, determining credit-worthiness by looking at social networks
has been called digital redlining.
[http://www.theatlantic.com/technology/archive/2015/09/facebo...](http://www.theatlantic.com/technology/archive/2015/09/facebooks-
new-patent-and-digital-redlining/407287/)

------
utnick
This article is very misleading when it talkes about interest rates.

Look at the pictures of the app on google play, one of the example loans is
borrow 3500, repay 3500 + 384 4 weeks later.

That is only 11% 'interest' , but it is over 1 month instead of 1 year as we
commonly call interest. So really, the rate is more like 130%+.

This is not radically different than a payday loan which will typically charge
10$-20$ fees per 100$ borrowed.

------
hydrogen18
From the article: "working with International Business Machines Corp". Is this
some hot new startup or has IBM actually gone back to branding themselves as
such?

------
aaronem
Is it just me, or do these "disruptive microlending startups" use basically
the same arguments as the usual run of payday lenders to justify what they do?

~~~
dlss
Payday lenders are mainly awful because they have to include the cost of
humans in their interest rates... which makes those rates absolutely awful vs
low-transaction-cost-relative-to-capital-size lenders.... Presumably a startup
that lends via phone doesn't have this problem :)

~~~
aaronem
Did you see the interest rates cited in the article? Even the lowest of them
is more in line with what you'd find on a credit card account than with what
you expect to see on a non-revolving loan of the sort these lenders are
offering. Their terms also cite transaction fees, which are generally ignored
in discussions of interest, but shouldn't be; when amortized over the term of
the loan to provide a basis for fair comparison, they tend to drive the cost
of the funds in question from merely high to utterly astonishing. (Payday
lenders pull a similar trick, using fixed fees rather than a more typical
interest calculation to hide the fact that their loans are priced absurdly
high by comparison with even the worst of credit cards.)

Granted, when you find yourself in need of emergency funds at short notice,
being able to obtain them even at an extractive cost is preferable to being
unable to access funds at any price. But this looks to me like a case where
the typical SV veneration of entrepreneurship, regardless of context, is being
used to draw a veil over the same abusive practices which have given more
typical payday lenders such a bad name.

~~~
dlss
> Did you see the interest rates cited in the article?

Yes. Did you?

article: Branch charges between 6% and 12% interest—based on the borrower’s
creditworthiness—and loans are usually repaid between three weeks and six
months later... Traditional microlending tends to be far more
expensive—interest rates often exceed 25%

So we're talking somewhere between 13% and 19% less interest (a 52% - 76%
decrease in interest rate)... which sounds like a large improvement, though I
agree it would be nice to see more discussion re: transaction fees.

What am I missing?

------
mkj
Westpac (one of the big 4 banks in Australia) recently added "View contacts"
as an Android app permission. Uninstall time.

