Lenddo is a social FinTech with the mission of improving financial inclusion. They started their operations in the Philippines in 2011. At first, they would verify identities using Facebook data and getting friends to vouch for them. They would then issue loans directly. With their learnings, they have created a more sophisticated product which we will explain below. Lenddo is currently operational in over 15 countries, they’re focusing on the emerging middle class in developing markets. Lenddo has found that a large proportion of this population lack credit history, yet have smartphones and other devices. In some cases, these countries do not even have official credit bureaus.
“Hundreds of millions of people are moving into the middle class and traditional underwriting doesn’t work. There’s not enough credit bureau data and no way to determine whom to lend to unless you use deep, opt-in social data.”
Lenddo launched their second product, LenddoScore in 2014, it offers a more insightful credit score to lenders. The LenddoScore is a patented scoring method which combines traditional underwriting with additional unstructured data. Via an app, Lenddo looks at an applicant’s entire digital footprint, they claim to have 12,000+ variables for each profile. Lenddo claims not to share this personal data with lenders, only the final result of their analyses, in order to protect their clients’ privacy.
As seen in the image above, Lenddo uses big data from social networks, browser histories, E-commerce transactions, geolocation data and other smartphone info – with the user’s consent – in order to create more insights. This is all done by leveraging AI technology. The AI tech is able to analyse all of this data, creating predictive features in the process. The outcome is a credit score between 1-1000 which banks and other lenders can use for clients which would have previously been left unserved. This includes a 50% increase in application approvals by their lending partners. This social FinTech boasts of providing 5 million people with greater financial inclusion.
In 2016, Lenddo was recognised as one of KPMG’s top 100 FinTech’s. More recently, FICO, the global credit agency, announced a major partnership with Lenddo to use their technology as part of FICO’s new score services in India. In addition, Experian partnered with Lenddo to use their technology in Indonesia and Vietnam.
We touched upon some data privacy concerns on a previous article about the Kiva Protocol which is a joint initiative by Kiva (a Silicon Valley microloan startup), and the Sierra Leonean government. In short, they have a blockchain database of fingerprints. We also touched upon Aadhaar, which has the biometric data of 90% of India’s population. This database contains the fingerprints and iris scans of 1.2bn Indians, it has also aroused many privacy concerns.
However, Lenddo’s grey area is different as they are creating sophisticated profiles based on analysing each customers’ digital footprint. This social FinTech creates profiles so sophisticated that banks trust them enough to part with their money, even if the traditional credit scoring method would advise them not to. Although each client has to give consent for this data use, would they be happy seeing the intricacies of what data is used and the profile that is created? Will this pose for a problem in the future? A few years ago, Facebook scolded insurance firm Admiral for basing insurance rates on Facebook posts. Admiral had to pull the plug on releasing their new tailored insurance plans. But was this Facebook’s job or should regulation not have permitted this in the first place?