GPS tracking payday loans are a real thing, but will they come to Australia?
A new microloan provider in India uses GPS tracking and social data to approve borrowers.
CashE, an app-based lender which started providing microloans in India last year, is using an innovative process that combines social data, call and message logs and GPS tracking to approve its loans.
The loans are designed for employed people between the ages of 22-36, and according to founder V Raman Kumar, the application and funding can be completed in 10 minutes.
Payday loans are new to India
"Banks are trying to get into long term lending. We would like to only go and cater to the immediate short term requirement. This requirement could be a lifestyle need, a family emergency or a medical emergency,” said Kumar at the NASSCOM Annual Leadership Summit in India last year.
While this type of loan – a "payday loan" – is well-known in Australia, the short-term, high-interest product is relatively new in India. To mitigate the perceived risk of the loans, CashE not only charges high (but standard) rates of 30-36%, the lender also looks at a multitude of data to make its decision.
Using data to decide
The company will "read" the borrower's phone and collect data from social networks such as Facebook and Linkedin as well as message and call logs. A GPS tracker will also be installed to track the borrower's movement. All of this information will go towards determining their creditworthiness score. This score is then matched with traditional Indian credit scoring sources such as CIBIL and also incorporates the customer's PAN card, bank statements and pay slips.
"We are not reading messages but just looking at the logs," said Kumar of the companies data mining practices. "We also look at the apps installed and uninstalled, GPS location, etc. which continues to be with us till we have your telephone number,” Kumar said.
The lender's algorithm is also improving, with the current default rate of 2.5% a far cry from the default rate of 11.5% which the company saw when it first started.
While some Australian short-term lenders allow you to "fast track" your application by logging into a social network, none have progressed to the level of reading call and message logs or placing a GPS tracker on your phone. However, those days may not be far off.
Say what you will, but payday lenders were among the first to innovative the personal loan application process in Australia. Online lenders used algorithms that allowed for automatic rejections or approvals and pioneered innovations such as asking for customer's Internet banking logins. This helped to keep the loan funding turnaround time to less than 24 hours, for which payday lenders are known.
So, while this data mining technique isn't being utilised in Australia just yet, keep an eye out for loan applications that want to log in to your Facebook account.