Who’s to Judge? First Cardless Bank to Use Social Media to Determine Creditworthiness
By
Joseph Dalton
-
02/02/2012 07:00:00
MovenBank has been referred to as a bank for the smartphone age. With Google Wallet, PayPal, Square, and so many others contending for the crown in mobile payments "it was only a matter of time before a dedicated mobile, cardless bank emerged."[1] MovenBank plans to fill that niche. It’s an online bank that will channel social, mobile, and gamification technologies to bolster its financial clout. Instead of issuing plastic cards for its customers, MovenBank will use NFC (Near-Field Communication) technologies to turn the phone into a payment device.
The company was launched by Brett King, blogger and author of Bank 2.0. And while it hasn't opened its doors quite yet, company leaders have already decided to use social media to "inform its credit decisions and to determine aspects of its relationship with customers, including pricing."[1] Are such judgments a step forward or a step back? According to the company website, the company's aim is to "…be the service you choose to live better with your money, making the way you spend, save, and live smarter."[2]
A shot of MovenBank's homepage. The site is currently in the alpha testing stage.
Today, many banks openly collect customer data from social media sites in order to adjust their marketing and customer service procedures. Despite that practice, it’s hard to find a bank willing to admit to making lending and customer pricing decisions based on social media profiles. Interestingly enough, such measures are integral to MovenBank's business model. According to Jeremy Quittner of AmericanBanker.com, the bank plans to "use information from Twitter, Facebook and other social networking sites not just for underwriting, but to price the entire relationship."[1]
While in the alpha stage, MovenBank developed a scoring system it calls CREDTM, a combination of traditional credit scoring practices and a consumer's social media credibility. CREDTM is intended to gauge creditworthiness, though it also encourages healthy spending habits through the use of a built-in rewards system. Will customers buy into the system or will they be discouraged by it? MovenBank is depending on the latter. [3]
MovenBank plans to examine a customer's timeliness in paying bills, negative balance records, and social network standing. Additionally, the bank will reward users for referring their friends to the bank. "We look at a bunch of elements, and one is your ability to act as a referrer, or influencer, who can drive acquisition as a basis for connections," King says. People will earn savings points and could earn free peer to peer transfers for their efforts. Much like BillFloat, a web-based bill payment service, MovenBank will use social media data to help with customer verification, which means the bank may search for information that could determine whether or not a customer is in a position to repay a loan. For instance, if someone says they're employed on a loan application, but turns around and tells their Facebook friends about their recent layoff, the bank could use that as actionable information.[1]
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MovenBank looks to cash in its chips on social sites like Facebook, banking
on information tied to online behaviors.
When it comes to social media profiling, MovenBank isn't the only fish in the sea. Banks and lenders can find valuable data on the back end of sites in order to better manage customer collections for small consumer loans and small business loans. According to American Banker: "Social media data is already being used to inform credit decisions on many peer-to-peer lending sites, such as Weemba Inc. and the newly launched SoMoLend LLC." SoMoLend, which was founded in Cincinnati by Candace Klein, uses the example set by Ebay to create a plan for determining the strengths of borrowers: "We believe when active lenders are willing to be like eBay and make a recommendation or speak of the strengths of someone as a borrower, the borrower will benefit, " Klein says. SoMoLend's approach is catching on. In an effort to target the market for small business loans, Key Bank recently forged a lead generating deal with SoMoLend.[1]
In the years to come, expect to see more banks using social media to manage and develop relationships with customers. The information within social media sites can help banks protect their investments, while bypassing unreliable customers. Could they change the way banks serve people? Will MovenBank be alienating their core customers out of the gate? Or, in wake of the mortgage crises, do customers want banks to remain proactive about providing different offerings to different types of customers? One thing's for sure, MovenBank will appeal to those ready to ditch the pocketbook for the virtual wallet and willing to embrace the usage of a cardless bank—one centered on financial mobility and driven by social credibility.
References
[1] Quittner, Jeremy. "Banks to Use Social Media Data For Loans And Pricing - American Banker Article." American Banker: The Financial Services Daily. 26 Jan. 2012. Web. 01 Feb. 2012. <http://www.americanbanker.com/issues/177_18/movenbank-social-media-lending-decisions-brett-king-1046083-1.html?zkPrintable=1>.
[2] Boyd Myers, Courtney. "Movenbank: The Worlds First Cardless Bank Launches in Alpha." Thenextweb.com. 3 Oct. 2011. Web. 28 Jan. 2012. <http://thenextweb.com/insider/2011/10/03/movenbank-the-worlds-first-cardless-bank-launches-in-alpha/>.
[3] "Movenbank | Our Vision." Movenbank | Home. 2011. Web. 01 Feb. 2012. <http://movenbank.com/vision>.
Tags: BillFloat, cardless bank, digital wallets, mobile payments, MovenBank, peer-to-peer loans, small business lending, small business loan, social finance, SoMoLend, virtual wallets