Apple Co-Founder Says Goldman’s Apple Card Algo Discriminates - Khaine
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notlukesky
Every credit card company discriminates. It is the nature of giving credit to
discriminate. A private lender giving someone money is not an entitlement (at
least in most societies). We build models to calculate payback. When those
models work the credit lender stays profitable and afloat. When the model
fails it should fail (assuming no taxpayer bailout). If the model misses out
on profitable creditworthy customers then that creates opportunities for new
entrants to the lending market. In fact there is already lots of competition
in the credit card space and Apple card is one of so many choices available to
be discriminated by. The only way to know if the algorithm works well against
losses is if this card is successful in the next economic downturn.
Conversely, if new entrants are profitable with similar business models to
Apple will we know if the algorithm is too conservative in giving credit.

On a side note, rejecting or limiting credit to delinquent borrowers is
actually doing them a favor due to the power of compounded interest.

Albert Einstein famously said that compound interest is the most powerful
force in the universe. He said, “Compound interest is the 8th wonder of the
world. He who understands it, earns it; he who doesn't, pays it.”

