Lending Startups Look at Borrowers’ Phone Usage to Assess Creditworthiness

Smartphones allow lenders’ apps to detect subtle patterns of behavior that correlate with repayment or default

By ELIZABETH DWOSKIN
Nov. 30, 2015 8:28 p.m. ET
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A handful of Silicon Valley-backed startups are looking to revolutionize lending in the developing world, where banks are scarce and many would-be borrowers have no credit history.

Their strategy: Show me your smartphone, and my app will find out how creditworthy you are.

Smartphones can dramatically reduce the cost of lending, experts say, because the apps they run generate huge amounts of data—texts, emails, GPS coordinates, social-media posts, retail receipts, and so on—indicating thousands of subtle patterns of behavior that correlate with repayment or default.

Even obscure variables such as how frequently a user recharges the phone’s battery, how many incoming text messages they receive, how many miles they travel in a given day or how they enter contacts into their phone—the decision to add last name correlates with creditworthiness—can bear on a decision to extend credit.

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