American Banker: First Access, Cignifi Use Big Data to Bring Economic Security to the Unbanked

In October, First Access chief executive Nicole Stubbs took the stage at the PopTech conference in Camden, Maine, opened her wallet, and proceeded to cast her ATM card and other financial records to the floor.

“If you live in a developing economy, chances are that your wallet looks a lot more like this one, it just has some cash in it,” said Stubbs, holding up the empty billfold. “How do you build real economic security in a cash economy?”

First Access, a startup based in New York City, and Cignifi, an upstart firm based in Cambridge, Mass., are working to address that by analyzing the cellphone use of loan applicants in emerging economies and delivering the information to lenders as a predictor of creditworthiness. Though their strategies differ, both companies see their algorithms as a way for the world’s roughly 2.5 billion adults who have no bank account to build credit histories.

“Ninety percent of adults in most markets have a mobile phone, so the data that is produced is a tremendous proxy for the way most people live,” says Jonathan Hakim, Cignifi’s chief executive.

First Access, which has introduced its service in Tanzania, has developed a cloud-based platform that pairs a lender’s appetite for risk with analysis of how often prospects replenish airtime, buy bundles of data and interact with their social network. The service suits Tanzania, where nearly 40% of people live in poverty and more than half have no access to any kind of financial services, according to Financial Sector Deepening Trust, which aims to broaden financial inclusion in the country.

Fewer than half of Tanzania’s 3.1 million businesses keep records while nearly two-thirds keep their savings in a secret hiding place, according to a survey conducted three years ago by the country’s trade ministry. “In developing markets, there’s no instantaneous credit-scoring tool, so lenders need to go to people’s homes and places of business and try to evaluate their net worth and ability to repay,” says Jessica Carta, First Access’s chief operating officer. “That can be difficult for someone who owns very little.”

With First Access’s service, a loan officer can text an applicant’s mobile number to the company, which in turn asks the applicant, also via text, whether they authorize the lender to tap their mobile transaction history and other demographic, geographic and financial information. If the applicant gives the go-ahead, First Access marries the applicant’s data and the lender’s risk profile to generate a recommended loan amount, which First Access texts back to the lender.

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