COINCIDENCE? IMF Calls for Credit Score to be Tied to Internet Search History & Biden, Democrats vow to rein in financial data collectors, citing breakdowns
IMF Calls for Credit Score to be Tied to Internet Search History
“The use of non-financial data will have large effects on the provision of financial services. Traditionally, banks rely on the analysis of customer financial information from payment flows and accounting records. The rise of the internet permits the use of new types of non-financial customer data, such as browsing histories and online shopping behavior of individuals, or customer ratings for online vendors.”
“The literature suggests that such non-financial data are valuable for financial decision making. Berg et al. (2019) show that easy-to-collect information such as the so-called “digital footprint” (email provider, mobile carrier, operating system, etc.) performs as well as traditional credit scores in assessing borrower risk. Moreover, there are complementarities between financial and non-financial data: combining credit scores and digital footprint further improves loan default predictions. Accordingly, the incorporation of non-financial data can lead to significant efficiency gains in financial intermediation.”
“Large technology firms collect vast amounts of non-financial data through their consumer-facing platforms in the areas of e-commerce, social networking, and online search. The sheer amount of data enables the use of “big data” analysis tools such as artificial intelligence and machine learning. The literature confirms their usefulness in finance.”
DOWNLOAD FULL REPORT FROM IMF: https://www.imf.org/en/Publications/WP/Issues/2020/08/07/Financial-Intermediation-and-Technology-Whats-Old-Whats-New-49624
Biden, Democrats vow to rein in financial data collectors, citing breakdowns
The Biden campaign argues that creating a government-run credit reporting agency would help minimize racial disparities by ensuring that algorithms used for credit scores don’t have a discriminatory impact and by accepting non-traditional sources of data, like rental history and utility bills, to establish credit history.
Leading the charge to revamp credit reporting are House Financial Services Chairwoman Maxine Waters (D-Calif.) and Sen. Sherrod Brown (D-Ohio), who is in line to head the Senate Banking Committee if Democrats win back Congress. The liberal lawmakers want comprehensive changes to rules governing the industry, starting with a temporary suspension of negative credit reporting as part of coronavirus relief legislation. They’ve gotten a boost from Biden, who is calling for the creation of a government-run credit reporting agency to compete against the private firms.
“The next Congress must enact bold, comprehensive legislation to reform a credit reporting industry that has failed working families and that perpetuates systemic racism and economic inequality,” Brown told POLITICO. “And that includes taking up Joe Biden’s proposal for a public credit registry.”
https://www.politico.com/news/2020/10/28/biden-democrats-financial-data-collectors-433302
IMF Calls for Credit Score to be Tied to Internet Search History
DOWNLOAD REPORT VIA PDF: IMF Working Papers “Financial Intermediation and Technology: What’s Old, What’s New?”
