Access to credit is a luxury many can not afford, and remains a metric of paramount importance when measuring financial inclusion in emerging markets.

In order to achieve financial inclusion we must first tackle the isssue of the 3 billion people who remain “un-rated”. This is where pyschometric testing comes in, an alternative to more traditional credit scoring methods such as FICO, the test leverages non traditional data to provide credit scoring and verification to economically empower the emerging middle class around the world.

The pyschometric testing services is on the rise, which is extremely encouraging for the estimated 200 million businesses that are currently deprived of funding. In this article we will mostly focus on Entrepreneurial Finance Labs (EFL), a US firm created out of Harvard University. EFL has recently merged with alternative credit provider Lenddo , as part of their #Include1Billion initiative; a project designed to bring financing to 1 billion  “un-rated” people worldwide. EFL’s pyschometric test is available in 20 languages, in 15 countries,  and across four continents, and as of October 2017, the company had issued “credit scores for nearly 1m people and enabled $1.5bn lending. It sells the credit scoring platform to more than 30 paying clients, such as banks, microfinance institutions and retailers.”

How does EFL work?

By applying psychometrics and behavioral science to loan repayments, EFL helps their clients, whether they are traditional or non-traditional lenders to Reduce Risk, Increase Lending and Boost Efficiency.

Risk Management 

“Assess and manage individual default risk. Incorporating character and willingness to pay means building better quality, more profitable portfolios.”

Increase Lending

“By enhancing your understanding of consumer and small business risk, you can safely grow your customer base. Fortify your competitive advantage by utilizing predictive information other lenders lack.”

Increase Efficiency 

“Integrate EFL into your existing credit and scoring processes. By automating and streamlining the loan decision-making process, you’ll save time and money.”

Watch how Mexican Microfinance Institution Te Creemos has used EFL’s services to boost productivity by 28% and double their individual loan portfolio all while maintaining risk levels and lowering prices for their customers.

How does the test work?

Each question in the assessment is carefully planned in order to reveal psychological attributes related to creditworthiness. EFL quantify behaviors and attitudes such as individual outlook, self-confidence, conscientiousness, integrity, and financial decision-making in order to build an applicant’s psychometric profile. By comparing this profile to others in the applicant pool, they can better understand and predict an individual’s likelihood of default.

Below we have an example question, measuring financial impulsivity.

“The marshmallow test asks children whether they would you like one marshmallow now or two marshmallows later, and since its advent, psychologists have recognized that the ability to delay rewards is an important predictor of later success in life.

While adults might not long for marshmallows the same way children do, a similar test can be performed using financial rewards, and research shows that people who are better at delaying rewards are less likely to default on their loans.

Drawing from this research, we ask applicants which of two options they would prefer, a smaller sooner amount of money, or a larger later amount (see image below). Asking people for their preferences across a range of monetary values and temporal delays reveals a quantitative profile of their financial impulsivity, which is indicative of their likelihood to repay debts”


Below is a video from LenddoEFL explaining how the use of AI and advanced analytics allows lenders to leverage digital and behavioral data to increase lending.

This test allows EFL to quantify certain personality traits, and the myriad exercises they use in the field allow them to produce a rich psychological profile that is predictive of credit risk.


Other companies like VisualDNA also use gamified tests. The London based organisation uses online tests comprised of a variety of questions which ask the respondents to choose from a photo. An example could be “what makes someone grown up?”, with pictures of someone voting, holding car keys, opening a house door, holding cash etc. listed below.

Although it may seem easy for a respondent to ‘cheat’ the test, VisualDNA and other companies like EFL have algorithms in place that judge the consistency of the respondent’s answers. Please use the sharing tools found via the share button at the top or side of articles.

In an interview with the Financial Times, Clare McCaffery, head of the credit and risk business at Visual DNA said that “The use of pictures makes it less obvious what the right answers are. By using pictures you elicit a more intuitive response.”

The VisualDNA test is based on the “Ocean” classification of personality types, which highlights traits such as openness, conscientiousness, extraversion, agreeableness and neuroticism. Another level of defence against applicants tailoring their answers is the picture-based options.

Try the test here –


As the psychometric testing industry gains traction, we are moving closer and closer to a future where universal access to credit is a reality……