https://www.wired.co.uk/event/wired-money-2016
There is lots of talk about machine learning at the moment, says Alexander Graubner-Müller. AI can write songs, compose novels and even beat the world champion at Go – and machine learning can even help with financial services.
Consumer credit is one of these areas, says Graubner-Müller, who cofounded Kreditech in 2012. There are two classes of consumer credit, he says – people with no access to credit and people with access to credit. One is middle class, well-employed and has a strong credit history. The other has more flexible employment situations, for example, and is underserved by traditional financial institutions.
Banks are not able to cope with the risk of these customers – in fact, in Kreditech’s native Germany, around 40 per cent of customers are considered to be “underbanked”. “This was a giant market opportunity,” says Graubner-Müller.
Graubner-Müller, who cofounded Kreditech in 2012, called algorithms the "building blocks for the next Industrial Revolution".
He also says stereotypical ways of gathering info on someone applying for a loan – via traditional credit bureas – may rely on other information from other institutions, which can be wrong, missing or late. Law can also restrict what information is shared with a burea.
But this is where Kreditech steps in. Every day produces more and more data – smartphone data, someone’s digital footprint. This is information owned by customers, who can share their own information as they want.
With this alternative data – and a further 20,000 data points – Kreditech makes a credit decision.
“Nothing else can cope with the vast amounts of unstructured data other than machine learning,” said Graubner-Müller. “It’s real time, and you can give a credit rating for underbanked customers”.
The process is automated from beginning to end, takes only a few minutes and is 24/7. Over time, the company develops relationships with customers, protecting both the company and the customer.
“Fintech is moving towards a large ecosystem,” said Graubner-Müller. “We want to be part of that ecosystem.
“We want to put people in control and change consumer credit so it’s no longer an unjust system.”
This article was originally published by WIRED UK
