If you think banks and insurers are not influenced by your personal data, you are going to have to have a rethink. Facebook recently put into place a patent to know whether you are a “good or bad” first-time buyer. Banks are establishing solid links with social medias. Analysts are trying to deduct people’s behaviors according to the private data. And, facing these aspects political protections remain very skim.
When Facebook starts to “like” lenders
Last August, Facebook filed a patent, to allow banks to examine user’s relations before approving or denying financial loans. Named the “Authorization and authentication based on an individual’s social network”, the patent evokes that:
“When an individual requests access to the content provided by this entity, the entity examines its user base to determine if any of its users is related to this individual. If there is a relationship and the individual and the related user are connected through authorised nodes, the individual is given access. If not, access is denied to the individual”.
So, having many friends that are unable to reimburse their loan encourages loaners to not approve one (and conversely).
However this part of the patent may never be adopted. Companies such as Google and Facebook tend to not always use the patents they have implemented, as using this part of the patent may irritate numerous users.
Start-ups using private data for finances
Facebook is not the only one on the market that uses big data for the financial sector. Some start-ups have become experts when it comes to spotting “risky” people.
For instance, the company Lenddo evaluates personality on a scale from 0 to 100. The objective? Analysing internet user’s behavior on social media before lending them money. “We think that our algoritms and your behavior online reveal your character” explains Jeffrey Steward, Lenddo CEO. “And this element is extremely important if you want to obtain a credit”.
On the other hand, LendUp, the online loans expert, scans Facebook and Twitter accounts, with the intention to assess people’s creditworthiness. The Chief Data Scientist at Zopa.com, Didier Baclin explained that “We use up a large number of variables, a mix of questions and insight collected via big data, to determine borrowers’ suitability and, more importantly, their ability and intention to repay the loan”.
The use of soft information, that users provide indirectly and voluntarily, such as public social media data, helps speed up the process for lenders and financial companies.
Facebook may know you better than your friends and family
Mixing big data and the financial sector sounds worrying.
“We are surprised to see that it is possible to go beyond standard information that you give us just by clicking on “like” on Facebook” explains Michal Kosinki, Assistant Professor in Organizational Behavior at the Graduate School of Business at Stanford University. “For instance, it is possible to predict accurately your ethnicity, age, gender or if you take drugs, and many other mental traits like your personality, your IQ, your “level of happiness” and much more. Based on 250 likes, a computer is more likely to evaluate better your personality than your husband or wife.”
“These technologies are usually used to offer modern financial services to people that do not have a financial or a credit history”, developed Michal Kosinski. “Hence, we can use these technologies to spot those that were to date disadvantaged or lacking of financial services”.
Slim political protections offered to citizens
How can citizens protect themselves from the beginning of the Big Data takeover in banks? The European rules on the protection of personal data is criticized by many people, they accuse lobbysites to have had their suggestions integrated in the texts. According to Eurosceptics, they are even less protected by a law that hardly protected them before. “We are in a situation where the Irish Data Protection commissioner is responsible of the control of Facebook, Microsoft, Apple and all other sites in the EU”, revealed Markus Beckendal, activist German journalist for netzpolitik.org. “And his department is as small as mine. It is not the best way to guarantee an adequate control of the protection of personal data.”
The current European legislation on data protection dates of 1995, long before internet was part of our day to day life. At the moment, it is not yet adapted, but is in construction, as explains the European Parliaments website. “New rules will update the existing legal principles and apply them to the new online environment, to ensure effective protection of the fundamental right to data protection and improve legal certainty for companies.”
Recent decisions are currently taking into account the citizens, with for instance with the rejection of “Safe Harbor” on 6th October. The legal arrangement allows American giants, such as Amazon, to collect European internet users’ personal data. But when American companies operate in Europe, they have to respect the European legislation by hosting and exploiting data in a different manner. They are no longer permitted to stock the data outside Europe. The European strategy is seeking to put the people at the heart of the thriving digital economy.
What would your Credit score look like?
Arte simulated the “reliability” of a financial profile using a “credit score”, with the company named Illuminus. Credit score is a note that is attributed to each individual that has a social security number in the USA. It is supposed to reflect people’s capacity to pay back debt. A good credit score allows people to have access to a credit card, a loan and eases daily transactions.
A German journalist, Richard Gutjahr, had his personality profile analysed, based to psycho-demographic characteristics used by API Apply Magic Sauce, developed at the Psychometrics Centre of Cambridge University. This predictive application determined that Richard Gutjahr is 42 years old and is a male. And, the analysis of cumulative data over a couple of years allowed us to get even more information.
Extract: “From your personality traits that are determined from your Facebook facts and according to scientific researches published the Journal of Risk Research, our algorithm has determined that you will be judged as a weak candidate to obtain a bank loan”.