Monday, May 3, 2021

How Your Online Presence Could Impact Your Ability to Borrow

A recent article on the International Monetary Fund blog written by Arnoud Boot, Peter Hoffman, Luc Laeven and Lev Ratnovski  provides us with another piece of the puzzle when it comes to the imposition of a social credit score as part of the new post-pandemic dystopia.  


Here is a screen capture of the article in question:



The article opens by noting that, thanks to recent IMF and ECB (European Central Bank) research, there are two areas of financial innovation that are of importance to the banking sector as follows:  


1.) new tools to collect and analyze data on customers, for example for determining creditworthiness.


2.) new approaches to customer relationships and the distribution of financial products.


For the purposes of this posting, I am going to focus on the first new area of innovation which sounds rather innocuous on the surface.


The authors continue with this (my bold):


"The most transformative information innovation is the increase in use of new types of data coming from the digital footprint of customers’ various online activities—mainly for credit-worthiness analysis.


Credit scoring using so-called hard information (income, employment time, assets and debts) is nothing new. Typically, the more data is available, the more accurate is the assessment. But this method has two problems. First, hard information tends to be “procyclical”: it boosts credit expansion in good times but exacerbates contraction during downturns.


The second and most complex problem is that certain kinds of people, like new entrepreneurs, innovators and many informal workers might not have enough hard data available. Even a well-paid expatriate moving to the United States can be caught in the conundrum of not getting a credit card for lack of credit record, and not having a credit record for lack of credit cards."


So, what new information does the financial sector need to make informed lending decisions?  According to the authors, financial technology or fintech can be used to assist in decision-making when it comes to consumer borrowing as follows:


"Fintech resolves the dilemma by tapping various nonfinancial data: the type of browser and hardware used to access the internet, the history of online searches and purchases. Recent research documents that, once powered by artificial intelligence and machine learning, these alternative data sources are often superior than traditional credit assessment methods, and can advance financial inclusion, by, for example, enabling more credit to informal workers and households and firms in rural areas."


The authors note that, thanks to social media mobile communications and online shopping being part of consumers' everyday lives, there is a great deal more data available for the financial sector to harvest.  When combined with artificial intelligence, financial institutions have a very powerful tool for granting and refusing credit to its customer base.


Here is a further quote from their full paper (my bolds):


"The use of non-financial data will have large effects on the provision of financial services. Traditionally, banks rely on the analysis of customer financial information from payment flows and accounting records. The rise of the internet permits the use of new types of non- financial customer data, such as browsing histories and online shopping behavior of individuals, or customer ratings for online vendors.


The literature suggests that such non-financial data are valuable for financial decision making. Berg et al. (2019) show that easy-to-collect information such as the so-called “digital footprint” (email provider, mobile carrier, operating system, etc.) performs as well as traditional credit scores in assessing borrower risk. Moreover, there are complementarities between financial and non-financial data: combining credit scores and digital footprint further improves loan default predictions. Accordingly, the incorporation of non-financial data can lead to significant efficiency gains in financial intermediation.


Large technology firms collect vast amounts of non-financial data through their consumer- acing platforms in the areas of e-commerce, social networking, and online search. The sheer amount of data enables the use of “big data” analysis tools such as artificial intelligence and machine learning. The literature confirms their usefulness in finance."


If you wish to read more on this subject, here is a link to the original IMF Working Paper.


Let's close with this information to help us put this posting into perspective.  Two of the authors of the paper have links to the World Economic Forum, architect of the Global Reset as shown here:


...and here:


As well, the Managing Director of the IMF, Kristalina Georgieva has strongly backed the WEF's dystopic post-pandemic world vision as quoted in this speech which was given to the World Economic Forum in June 2020 (with the Prince of Wales in attendance):

"So, what would it take for historians to look back at this crisis as the moment of a Great Reset?


From the perspective of the IMF, we have seen a massive injection of fiscal stimulus to help countries deal with this crisis, and to shift gears for growth to return. It is of paramount importance that this growth should lead to a greener, smarter, fairer world in the future. 


It is possible to do this. Provided that we concentrate on the key elements of a recovery—and act now. We don’t need to wait.


At the IMF, we see some tremendous opportunities."


Given the role that social media platforms and online consumerism is playing in the culture of the advanced economies of the world and the growing likelihood that all humans will be forced to accept a form of digital identity that is linked to health and potentially to social behaviours, this paper on the website of one of the world's leading non-governmental/non-elected financial bodies should be of great concern to all current and future debt holders.  If the use of your online behaviour is used to determine your borrowing ability as part of a social credit score, then we can pretty much assure ourselves that any semblance of privacy is officially over and that any misbehaviours (in the eyes of our "lord class") will be punished where it really hurts; our finances.

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