Friday, 12 February 2016

Role of technology in alternate finance: Part 2

Alternate finance is the new kid on the block. And it’s got along with it a lot of innovation to play with. While old systems continue to exist inefficiently and ineffectively, technological innovation is paving the way for superior finance options. Though this is an extremely positive movement in the industry, we must also be aware of the most important factor in the industry: Credit Risk.

Being oblivious to credit risk can run cash flows to the ground. It is extremely important to maintain credit checks to minimise the opportunity of default. A lot of credit checks are done manually by human beings. This is time consuming and lowers the overall efficiency of a lender. This is where technology comes in. Thanks to innovation, credit checks can now be done in a matter of seconds and this credit check is extremely accurate. It gives you exact details of a person’s behaviour and analyses various parts of the person’s background. When it comes to automated credit checks, systems look at some particular things:

  1. Social behaviour: This factor maps how a person behaves socially through social media platforms. Social media platforms are virtual websites where a person interacts with his/her social group; be it friends, family or co-workers. This behaviour also helps evaluate his/her credit worthiness.
  2. Web presence: Systems also take a look at online activities of a person to understand his/her behaviour. Data regarding the online behaviour of a person gives valuable insight on how the person behaves. This kind of behaviour helps understand more about his character.
  3. Fraud detection: Technology now can track fraudulent behaviour to understand if a person is likely to default or not. Some set parameters check if the person is likely to commit fraud and this greatly reduces the credit risks of a lender.
  4. Financial activity: Of course, the most basic factor is the financial background of the person. Financial activity of a person gives a lot of insight into a person’s life and this is a very important factor in understand how credit worthy he/she is.


While we have to make sure that we minimise credit loss, we cannot be frivolous with regard to the credit rating of a person. Technology helps us become more accurate and more efficient with this regard. Technological innovation is the right path for alternate finance and we must follow through with full speed.


Subscribe via email

Like the post above? Please subscribe to the latest posts directly via email.