A personality testing company based in London has started offering a service to test the likelihood of borrowers repaying a loan. It is already being used in Eastern Europe, Turkey and South Africa and claims to increase uptake of loans.
The company VisualDNA has developed a series of image-based tests that it says will determine whether a client is one who will repay a loan or not. “Not everyone has a credit score, but everyone has a personality” says VisualDNA, who work out of London’s ‘silicon roundabout’ in Shoreditch, adding that they have “proven a link between a person’s psychological traits and their financial behaviour.”
They would not be the first to do so, and it seems fairly obvious. But creating a measure is another matter altogether – how do they calculate whether a person has a propensity towards strategic default, where the default is deliberate, and financial mismanagement, where it is a matter of competence?
The VisualDNA website
VisualDNA uses psychometric tests including an online quiz, for example showing images to prospective borrowers to test their reaction to stress: “Using the latest psychological research, VisualDNA has developed a methodology which accurately depicts a physical person as digital data by assessing personality, values and attitudes. That enables us to predict specific financial behaviours on the basis of scientifically valid measures and psychological constructs both based on solid models; such as the Big Five model of personality.” The Big Five model measures openness, conscientiousness, extraversion, agreeableness and emotional stability. “By examining a customer’s financial personality, motivations and outlook on life we can help you make the right lending decisions more of the time,” says VisualDNA. “With improved decision accuracy and default predictions you can increase profitability and minimise losses.”
Using images, they believe, gives a more honest and intuitive response, with researchers recording, for example, the degree of hesitation before answering, and tracking the curser of the mouse.
VisualDNA are keen to point out, however, that their aim is not to reduce borrowing, but to expand it into areas where borrowers are routinely turned away due to a lack of credit history. They claim a 23% reduction in defaults for the same volume of loans: “Your Customer Acquisition strategy, when powered by VisualDNA data, allows you to see the humanity and the potential in each and every applicant. We support applications lacking information with a more rounded view of who the candidate is, not what they have or haven’t done.”
The company says it is working with a major UK bank, and Experian the credit scorer.
by Christopher Nye, Editor, OPP Magazine